Xi's pledge misses point

During his virtual speech at the 76th session of the United Nations General Assembly, Chinese President Xi Jinping pledged to end the financing of new coal-fired power plants overseas. Many observers cheered this move, seeing it as a game changer for the coal phase-out process the world urgently needs.

In reality, China's financing of coal-power plants overseas is quite limited compared with its own production. In 2020 alone, the country installed 38 gigawatts of new coalfired power capacity at home, an amount that equals the entire coalfired power capacity currently installed in Germany, to reach a total installed capacity of 1,095GW.

This year looks even more threatening, at least from the perspective of climate policies, as China has an additional 100GW capacity either under construction or approved for construction within its borders - and these estimates do not incorporate the likely increase in coal production as a consequence of the country's ongoing power crunch.

This contrasts sharply with the

20GW that Chinese institutions are currently financing overseas, according to the Boston University

China's Global Power Database, notably considering that many of these projects are been delayed or canceled altogether.

That is, the commitment to stop overseas coal funding is of course welcome, but it comes at a time of firm decline of such funding in any case. A key driver of the reduced demand for coal power plants overseas lies in the increasing price competitiveness of renewable energy, especially solar and wind, let alone their cheaper financing as financial institutions have gained a better understanding of climate-related financial risks.

All in all, given China's domi- This is, thus, not only a win for the nance in solar and wind energy, global fight against climate Chinese institutions might actually change, but also for China. gain from President Xi's pledge, as The most difficult task, indeed, they will move from financing as regards China's commitments to riskier coal plants to renewable. reduce emissions, is to reduce

‘‘China's current power crunch can only make matters worse. Local governments have started rationing electricity given the lack of price signals electricity being heavily subsidized while local governments struggle to reach their emission targets