Yesterday (21 September) gave us that rare bird, a moment when the impossible suddenly seems possible. Five weeks before the Cop26 climate talks begin in Glasgow, in a world mired in various geopolitical shenanigans, progress on climate action isn’t a given. Yesterday, however, brought two pieces of good news. President Xi Jinping announced China would not be financing any new overseas coal-fired power projects and President Joe Biden pledged to double US climate financing for developing countries.
Both commitments were made during this year’s UN General Assembly in New York and were welcomed as key milestones on the road to getting all countries to promise ambitious climate action at Cop26 in November.
In recent years, China has been, by far, the biggest provider of overseas coal finance, spending tens of billions of dollars to build coal power facilities in 152 countries through its Belt and Road Initiative. Around 70 per cent of all coal plants built globally now rely on Chinese funding. The International Energy Agency has made it clear the funding of new fossil fuel supply projects must end if the world is to have any chance of keeping global heating below the internationally agreed limit of 1.5°C above pre-industrial levels.
China’s statement follows a commitment by South Korea in April this year to end state-backed overseas coal finance, and Japan’s decision to join the other G7 countries and halt international coal financing by the end of 2021. Since 2013, public finance from China, Japan and South Korea has accounted for more than 95 per cent of total foreign financing for coal-fired power plants.
Unlike China's announcement to the UN General Assembly last year, when it said it would achieve a peak in carbon dioxide emissions by 2030 and carbon neutrality by 2060, its latest announcement is not a bolt from the blue.
China’s investment in overseas coal-fired power projects has been declining for some time. In 2020, for the first time, the country’s investment in renewable energy (wind, solar and hydro) in Belt and Road countries exceeded investments in fossil energy projects, accounting for 56 per cent of energy investment. In the first half of 2021, China did not finance or invest in any coal projects in these countries, says the American Enterprise Institute. An end to Chinese finance could facilitate the cancellation of over 40 gigawatts of pipeline projects in 20 countries, equivalent to all the coal power plants in Germany.
In addition to promising to end support for new coal-fired power stations abroad, Xi Jinping also said China would "step up support for other developing countries in developing green and low-carbon energy”.
The news was welcomed by climate experts. However, as the world’s largest emitter, China must also announce more ambitious climate action inside its borders, insists Helen Mountford from the World Resources Institute. China’s carbon dioxide emissions grew at their fastest pace in more than a decade in the first quarter of 2021, increasing by 15 per cent year-on-year and reaching a new record high of nearly 12 billion tonnes. Just as worryingly, new coal power and steel projects announced in China in the first half of 2021 – 18 new blast furnace projects and 43 new coal-fired power plant units – would, if built, emit as much carbon as total annual emissions from the Netherlands, shows research published by the Helsinki-based Centre for Research on Energy and Clean Air in August.
Mountford also underlines the need for private investors and financial institutions to make similar commitments to ending overseas coal financing. "Now the world's major governments have led by example and banned overseas coal plants, it is time for the private sector to follow suit," says Kevin Gallagher from Boston University. "We will not meet our global climate and development goals if the private sector continues to finance overseas coal." Many large commercial banks in China are indeed starting to express a willingness to change their investment strategies.
The second piece of good news was the US finally stepping up to meet its global climate finance commitments. In 2009, rich countries promised to deliver $100bn a year to the developing world by 2020 to help poorer countries mitigate and adapt to climate change. However, this target has never been met, with the US having an especially poor record.
Biden has been under significant pressure to step in where his climate-sceptic predecessor Donald Trump failed. His pledge yesterday to double US core climate finance from $5.7bn to around $11-12bn a year, finally put the $100bn in reach.
“There’s a long way to go to rebuild trust in multilateralism but Biden’s announcement…is a big step in the right direction,” says Claire Healy, head of the Washington office of climate think tank E3G.
As to the role that UK Prime Minister Boris Johnson will play as host of Cop26? Iskander Erzini Vernoit, E3G’s climate finance expert, notes that, “Lots of international commentators were quite impressed by Johnson's language on Monday,” as he urged global leaders to increase climate support funding. But Erzini Vernoit believes this reflects the fact the Prime Minister was talking about China and the US, commenting that, “Johnson is more comfortable talking about what others should do than addressing UK climate policy shortfalls.”
One big financing issue is the UK’s decision last year to cut aid spending from 0.7 per cent to 0.5 per cent of its gross national income. “To inspire confidence in the rest of the world, Johnson needs to reverse this decision,” says Erzini Vernoit. “To lead the world costs money.”