When a giant infrastructure project in an emerging country doesn’t make sense these days, you can usually count on China’s Belt and Road to be on hand with a bailout check.

For the global coal industry, that prospect has been one of the last great hopes for demand growth. Chinese policy banks have committed some $45 billion to coal projects overseas since 2000, according to a Boston University database. 

That pattern may be starting to crack. Pakistan, which has been working on an aggressive expansion of new coal power plants under the Belt and Road’s China-Pakistan Economic Corridor, is getting cold feet. The country’s planning minister has told Beijing that it’s not interested in developing the Rahim Yar Khan plant, a potential 1.32 gigawatt project that would probably have left the country’s grid well over capacity.

While the big beasts of potential coal development are China and India, smaller second-ranked markets such as Pakistan are likely the tougher nuts to crack to wean the world from its most polluting fossil fuel. 

Turkey, Vietnam, Indonesia, Bangladesh, Egypt, Pakistan and the Philippines together have about 144,729 megawatts of coal plants that are between initial announcements and their first concrete pour, according to CoalSwarm, a group that tracks project activity. That’s more than the 139,656 megawatts of projects at the same stage in China and India.

Whereas new wind and solar is already cheaper than coal in those two countries – one reason project cancellations there are only likely to increase – that’s often not the case in smaller emerging markets, where the plug-and-play availability of thermal plants plus the existence of overseas developers seeking to build them can still look tempting. As my colleague Liam Denning wrote last year, coal is like junk food: ubiquitous, full of calories and (at least at the building stage) cheap.

Still, power generation is more about long-term than short-term costs, and with fuel accounting for about half the price of coal generation, the presence of willing foreign builders can only stave off economic reality for so long.

Coal in the Thar region east of Karachi already costs about twice that of equivalent lignite in other markets and the area’s multiple thermal projects may become uncompetitive, Syed Akhtar Ali, a former member of the country’s Planning Commission, wrote in the Express Tribune last year.

That dynamic is accentuated by the speed at which rival sources of energy are dropping in price. Pakistan has a rich endowment of wind and solar resources and has already joined the club of countries where the costs of new renewables are lower than coal.

Long-run costs for wind projects are at about half the cost of coal, according to government data cited by the Institute for Energy Economics and Financial Analysis. Given the low penetration of variable renewables and high share of natural gas, solar and wind won’t even need significant storage backup to maintain grid stability.

As a result, building thermal plants would saddle citizens with higher electricity prices than they’d pay for renewables, on top of contributing to choking pollution and peak summertime temperatures that may rise to the edge of survivability.

Unfortunately, economic reality and the dangers of climate change alone won’t be enough to halt the juggernaut of externally funded coal. In contrast to thermal projects, renewables in Pakistan have suffered from a lack of policy clarity as well as outright obstruction by the government’s power distribution company, which “has continually acted in an ad-hoc and discriminatory manner” toward independent power producers, according to the country’s National Electric Power Regulatory Authority.

Thanks in part to that backdrop, current plans see wind, solar and biomass rising to just 8.3 percent of Pakistan’s energy mix in 2025 from 5.6 percent today, while coal will climb to 20 percent from 3.1 percent.

With new Prime Minister Imran Khan seeking to trim outlays to avoid a fresh bailout from the International Monetary Fund, taking the scissors to these projects should be a good place to start. Maximizing Pakistan’s abundant renewable resources would be cheaper, nimbler, and better for the long-term future of its sweltering population. New fossil fuel projects should be banned, as energy consultant Khurrum Lalani argued last year. It’s not too late for Pakistan to embrace the future.

To contact the author of this story: David Fickling at dfickling@bloomberg.net

To contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

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