When will China build its last coal-fired power plant?
A study published Friday indicates that at least 18 new coal plant projects abroad will probably go ahead despite the pledge. At home, power shortages and fears of energy insecurity, worsened by turmoil in international fossil fuel markets from Russia’s war on Ukraine, have renewed convictions that China’s rich coal reserves must remain the country’s main energy source in the near-term.
China already consumes and produces about half the world’s coal and continued expansion of output and capacity make achieving its climate goals look ever more remote.
Overseas, the prohibition on new plants has led to the cancellation of about a fifth of announced projects but an apparent loophole appears to allow continued Chinese involvement, even in some coal power plants not yet under construction when the pledge was made.
On Wednesday, Premier Li Keqiang confirmed a goal of 300 million tons of new coal production capacity in 2022, up from 220 million tons added last year. In March, Chinese miners dug out more coal per day than ever before. Earlier this month, the government of Ordos city, a coal-extraction powerhouse in Inner Mongolia, approved plans to tap a 2 billion-ton coal-reserve spread across 65 square miles with expected output of 15 million tons per year.
Chinese leaders want to safeguard against another power crunch while also upgrading the sector to make it as efficient as possible, “but by relying this much on coal now, they’ll make future leaders’ job of really pushing decarbonization progressively harder,” wrote analysts at Trivium, a China-focused research firm, in a recent note. “It won’t be long before it becomes nearly impossible.”
Internationally, the Chinese ban on new overseas coal plants has led to 12.8 gigawatts of coal power being shelved or canceled, but the fate of another 57 plants remains uncertain, according to the analysis by the Center for Research on Energy and Clean Air (CREA). Of those projects, 18 remain in a “gray area” where, despite no construction having taken place, they may go ahead due to having secured financing and permits.
Many of those plants are in Indonesia, which, like China, has been unwilling to abandon this readily available source of energy. Although the Southeast Asian country signed a COP statement pledging to transition away from “unabated” coal by the 2040s, it has been slower than neighbors like Vietnam to scrap projects.
Chinese companies have this year been contracted to build or supply parts to two coal power plants in Indonesia that are connected to industrial parks included in Chinese President Xi Jinping’s signature “Belt and Road” initiative to build infrastructure, trade ties and influence across Eurasia.
Because these projects are a priority for the local government, they are likely to go ahead “even though financing is drying up everywhere and domestic banks don’t have sufficient capital,” said Isabella Suarez, a researcher at CREA. Given Indonesia’s climate pledges, “it’s not really logical to continue building these projects that will have to retire early,” she said.
Xi’s announcement that China would stop building coal power plants overseas was among the most dramatic pledges to emerge from international negotiations ahead of the summit. It came after he had already pledged to “phase down” domestic coal production after 2025 as well as announced plans to peak the country’s carbon dioxide emissions before 2030 and reach carbon neutrality by 2060.
The Chinese government plans to meet those targets through a world-leading build out of renewable energy sources as well as more nuclear power plants. The rocky expanse of the Gobi Desert is set to become home to an additional 455 gigawatts of wind turbines and solar panels — more than double the total current capacity of the United States — by 2030.
Despite pressure from environmental activists and Western governments to bring forward the 2060 deadline for achieving net-zero emissions, China argues that its current plan is the fastest time frame a country of its size has proposed.
At the same time as underscoring the urgency of China’s climate ambitions, Xi has warned against an energy transition that interferes with “normal life” for Chinese people. Renewable energy must become reliable before traditional power sources are abandoned, he told leaders in January.
Slow-walking the coal phase down would put China directly at odds with the recommendations of the latest report from the U.N. Intergovernmental Panel on Climate Change, which suggests coal use needs to fall by three quarters from 2019 levels by 2030 to keep warming below 1.5 degrees Celsius above preindustrial levels by 2050.
At the level of individual power plants, the continued investment in new coal generators is difficult to understand, given profitability across the sector is declining and analysis suggests that new investments are likely to become “stranded assets” unable to recoup their investments.
But from the perspective of the Chinese government, the short-term and localized economic benefits of new plants can make sense, given the industry is dominated by state-owned enterprises.
The nature of China’s political economy — where the government often owns not just the power plant but the construction company that builds it, the mining company that supplies the coal and the purchaser of the power — helps explain the decision to keep building, said Philippe Benoit from Columbia University’s Center on Global Energy Policy.
Research published by Benoit and colleagues this week estimated that, without a pricing mechanism to reflect the additional costs of carbon dioxide pollution, a newly built coal power project in China might take only seven years to break even when considering its broader economic value.
But that analysis breaks down when you factor how badly the climate crisis could damage growth potential, which China is struggling to balance against a desire to keep the economy humming. “That is what you are seeing shift over time as they run into economic problems,” Benoit said. “There’s a tendency to downplay the future damages to generate short-term economic benefits.”
Part of what makes the decision to leave coal behind so difficult is the legacy of the Chinese coal industry, which has powered the country’s meteoric economic rise.
The fundamental issue determining the speed of China’s coal phase down is the government’s approach to spurring growth and its ability to move away from smokestack industries, said Jorrit Gosens, a scholar at Australian National University, lead author of the paper.
As long as China relies on stimulating its economy through construction and other carbon-intensive energy, renewable energy will never be enough, even if its use surpasses stated targets. “That very big expansion of wind and solar doesn’t ensure a reduction in coal-fired power,” Gosens said.