China’s pledge to stop building coal plants overseas deals another blow to an increasingly challenged sector, but just how much damage it inflicts will depend on several unknowns around implementing the pledge.
During a speech at the United Nations General Assembly on Sept. 21, Chinese President Xi Jinping announced that the country would no longer build coal-fired power plants abroad and will instead focus on an accelerated transition to a low-carbon economy. However, Xi did not mention a timeline, explain whether building new coal plants abroad would explicitly mean an end to overseas coal financing or if the policy would apply to plants that are not yet under construction but have financing in place. It is also unclear if China will try to restrict private financing of coal-fired power plants or if the announcement would include equipment and construction services.
Thom Woodroofe, a former climate diplomat and a fellow at the Asia Society Policy Institute, said the announcement drew a “massive line in the sand” that sends a market signal to the rest of the world.
“The real stress test now will be how that is carried through, and how robustly that is carried through, but also what China’s prepared to do domestically, including with respect to their own consumption of coal,” Woodroofe said in an interview