Talk of the Town
The US-China Joint Statement Addressing the Climate Crisis, reached between John Kerry and his counterpart Xie Zhenhua in Shanghai on April 16, kicked off a week of heated speculation about what new policies China may announce with regard to its involvement in coal projects along the Belt and Road.
In the statement, both countries committed to “take appropriate actions to maximize international investment and finance in support of the transition from carbon-intensive fossil fuel based energy to green, low-carbon and renewable energy in developing countries.” It fell far short of a total phaseout of coal financing from China that some were expecting.
Observers then anticipated that President Xi would provide some elaboration (or “upgrade”) on this point in his keynote address at the 2021 Bo’ao Forum in Hainan Island on Apr 20. After all, the forum’s theme this year was “Join Hands to Strengthen Global Governance and Advance Belt and Road Cooperation.” But Xi’s address at the event was even vaguer: “We could [sic] strengthen cooperation on green infrastructure, green energy and green finance, and improve the BRI International Green Development Coalition, the Green Investment Principles for the Belt and Road Development, and other multilateral cooperation platforms to make green a defining feature of Belt and Road cooperation.”
For China’s international finance heavyweights at Bo’ao, debt sustainability appeared to be a bigger concern than climate sustainability. At a roundtable session, former central bank governor Zhou Xiaochuan, AIIB President Jin Liqun, China Eximbank President Hu Xiaolian and Vice Minister of Commerce Qian Keming discussed the role of sustainable finance along the Belt and Road. Qian provided probably the only marginally substantive elaboration on Xi’s green BRI comment. When outlining priorities for BRI infrastructure development in the next phase, he highlighted “green and low-carbon energy, including gas, solar, wind, hydro and nuclear,” noticeably not mentioning “clean” coal. But he did say that such green energy projects should work hand-in-hand with “conventional energy enterprises” to produce energy projects that “bring higher [net] environmental benefits and total benefits to host countries”, which may suggest some sort of bundling of fossil fuel and renewable developments as is happening in China right now.
Other roundtable participants focused their attention on the debt burden of BRI countries. Jin Liqun insisted that only new financing, rather than withheld financing, can pull debt stressed countries out of their difficulties. “The priority is to control the pandemic,” he said, “only a healthy country can be a productive country.” Hu Xiaolian stressed that Chinese financing should aim at strengthening a host country’s “self-revitalisation capabilities”. It should be “measured in its scale” and “controlled in its pace,” not going beyond a host country’s absorbing capacity. She mentioned that China is actively participating in G20’s second round of debt suspension. But she did not forget to emphasize that in debt renegotiations China has to take care of both sides’ (debtor and creditor) interest: “Sustainable finance is not grant or welfare support,” she said, “some financing costs actually incentivise host countries to better spend the money.”
As the Bo’ao Forum did little to add substance to the “coal-free BRI” vision that the Kerry-Xie statement only alluded to, the hope that China might ditch overseas coal financing in one stroke (or speech) quickly dissipated as observers ran out of plausible scenarios in which that could happen. Xi’s much anticipated appearance at Biden’s Leaders Summit for Climate was only announced 24 hours ahead of time. Speaking immediately after Biden and UN Secretary General Guterres, Xi only gave Green BRI a side-mention. The big announcement was that China will “strictly control” coal power domestically in the next five years and aim to reduce coal consumption starting from 2025. In the domestic context, this is probably the first time that coal (and its decline) was given such a central place in the top leader’s address. On the other hand, it signals that overseas coal is a (perhaps distant) secondary consideration compared to the domestic energy transition and development pathway.
At the same Summit, South Korea’s President Moon Jae-in pledged that his country would stop public financing for coal-fired power plants overseas. "It is imperative for the world to slow down coal-fired power plants, although developing countries that will struggle due to the heavy dependence on coal should be given due consideration and proper support," he said.