Belt and Road

At the coalface

China blocks funding to coal power in Bangladesh but not at home


Carbon footprints: coal workers in Bangladesh

Bangladesh’s bet on coal-fired power is a contentious choice for a low-lying country prone to flooding. Perhaps that was why it said it was reconsidering the 29 coal power plants in the development pipeline last year, although there were also rumours that funding from foreign backers was getting harder to find.

Like a number of energy-hungry nations in China’s Belt and Road Initiative (BRI), Bangladesh has turned to the Chinese for help. So it seemed significant when the Financial Times reported last week that Chinese officials had put in writing a refusal to fund new projects that rely on coal.

“The Chinese side shall no longer consider projects with high pollution and high energy consumption, such as coal mining [and] coal-fired power stations”, embassy staff were said to have informed Bangladesh’s finance ministry in a letter.

It isn’t clear whether the refusal is the beginning of a wider rejection of fossil-fuelled power generation in BRI projects. Yet climate campaigners will be hoping that the decision is part of a broader push for cleaner energy – triggered by Chinese President Xi Jinping’s pledge last year that China will reach carbon neutrality by 2060, with carbon emissions peaking by 2030.

Set against this promise is that the Chinese are still building new coal-fired plants at home at a frantic click, installing three times as much new capacity last year as the rest of the world combined, according to Global Energy Monitor, a non-governmental organisation based in San Francisco.

Policymakers respond that they are doing as much as they can to introduce cleaner, more efficient coal-fired plants. They are also starting to transform the country’s energy mix. At least 120GW of wind and solar generation was installed last year – nearly twice the amount completed by the United States and European Union combined. This is only the beginning of a gargantuan task, with more than half of China’s energy generation still derived from coal. The Institute of Climate Change and Sustainable Development at Tsinghua University, a well-respected think tank, reckons that the Chinese will have to spend about $20 trillion on the equivalent of three times existing global wind power capacity and four times that of solar power. That’s if China is to get its coal-focused system within touching distance of the 1.5-degree limit on global warming.

Critics say that Beijing should be trying to stop the same dependency on fossil fuels developing in other countries, where the Chinese are financing at least a quarter of the coal plants in construction, many under the auspices of the BRI.

Dirty power on the BRI also gives the Biden administration an opening to wrest back the initiative on climate change, following Xi’s shock announcement on the carbon-neutral goal at the UN General Assembly last year.

Biden has said that the US will rejoin the Paris Climate Accord this year and the US president has a track record of taking aim at the BRI, calling for a “united front of nations to hold China accountable to high international standards” in its loans to other countries.

He also warned during his presidential campaign that he would be pushing other countries to go beyond their initial commitments to lower emissions. “This is especially true for China, by far the world’s largest emitter of carbon,” Biden insisted. “We will not only hold their leaders accountable for reducing carbon output at home, but make sure they stop financing billions of dollars of dirty fossil fuel projects all across Asia,” he added.

One of the ideas in circulation is some kind of carbon border tax that penalises exporters from nations that aren’t doing more to fight climate change. But the danger is that a more combative approach sparks a new round of clashes between the two governments, when climate change can’t be countered without close collaboration between them.

Some friction seems inevitable, not least when the Chinese are conflicted internally in how to reduce their reliance on dirty energy, as different agencies and ministries battle for their say.

That was apparent again with the release of a study last December by the Ministry of Ecology and the Environment, co-authored with six international NGOs. The plan to monitor BRI lending more closely carried suggestions for a system that waves through loans for greener projects but takes a longer look at lending for energy generation, petrochemicals, and metals and mining.

It is too early to tell whether it will get traction with key departments like the Ministry of Commerce and the NDRC, however.

On the face of it China’s central government would seem to have the whip hand in driving policy in regard to carbon neutrality goals – given the majority of coal-related projects are financed, developed and operated by state-owned firms.

But efforts to cut back on fossil fuels also trigger turf wars with the coal producers and the older-style power stations. Provincial economies that rely on coal mining are resistant too – so too the local bureaucrats that have built their careers on coal-fired power generation.

Greater spending on coal-fired power is still tempting for decision-makers closer to the heart of government too, especially as a way of juicing up GDP in the shorter term in the wake of the Covid-19 pandemic. Lauri Myllyvirta of the Centre for Research on Energy and Clean Air reckons that the Chinese power sector already had a significant surplus in coal-fired capacity in 2019, with the average plant operating at just under half of its potential. Yet more such power stations are still being added each year.

Ironically Chinese officials may have a better chance of blocking coal-fired plants in Bangladesh than they do at home.

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