China Pledges to Halt Financing of New Overseas Coal Plants
China's decision to end financing for new overseas coal projects marks a pivotal shift toward global green energy, with far-reaching climate and economic implications.
China’s Landmark Pledge: Ending Overseas Coal Financing
In September 2021, Chinese President Xi Jinping made a defining announcement at the United Nations General Assembly: China would cease building and financing new coal-fired power plants abroad. As the world’s biggest public financier of overseas coal projects, this pledge marked a turning point for international climate policy and global energy finance. The decision not only signals China’s shifting priorities but also holds profound implications for developing nations, global carbon emissions, and the evolving landscape of energy infrastructure investment.
Background: China’s Role in International Coal Finance
For years, China played an outsized role in global coal development:
- Major Financier: Chinese banks such as the Bank of China and China Development Bank were among the largest funders of overseas coal mining and power generation projects, underwriting many developments in Africa, Southeast Asia, and beyond.
- Belt and Road Initiative: Many of these coal projects were tied to the Belt and Road Initiative (BRI), an ambitious effort to develop infrastructure and expand economic corridors across more than 70 countries.
- Environmental Impact: According to Global Energy Monitor, Chinese state finance was connected to over 40 gigawatts (GW) of proposed coal power plants abroad, translating to billions of dollars in investments and potentially hundreds of millions of tonnes of CO2 emissions annually.
The magnitude of this support meant that China’s policy decisions set the pace and direction of coal expansion—or retraction—worldwide.
Details of the Announcement and Initial Responses
President Xi’s statement in September 2021 was direct:
- “China will step up support for other developing countries in developing green and low-carbon energy, and will not build new coal-fired power projects abroad.”
Financial institutions swiftly echoed the pledge:
- The Bank of China, among others, declared it would halt financing for foreign coal mining and coal-fired power projects starting October 2021, aligning with the new policy.
- Other state-owned enterprises and commercial banks indicated intentions to phase out coal investment overseas, reflecting industry-wide recognition of China’s climate ambitions.
Experts reacted by noting the global significance:
- Kevin Gallagher (Boston University Global Development Policy Center) called it “more ambitious than anything the West has done,” underscoring how the move sets a new global benchmark.
- Environmental advocates and climate negotiators hailed the commitment as a potential end to international public financing for coal, raising hopes for a broader global shift toward clean energy financing.
Breakdown: Scope and Limits of the New Policy
China’s pledge is highly influential, but there are important caveats:
- Prospective Scope: The policy applies to new coal-fired power projects abroad. Projects already underway, contracted, or in late development prior to the announcement are generally excluded and may proceed towards completion.
- Domestic Coal Unaffected: The commitment covers overseas coal investments only. China continues to construct and operate coal plants domestically due to grid stability concerns and transitional energy demands.
- Renewable Energy Emphasis: China also pledged to increase support for renewable energy infrastructure (wind, solar, hydro, etc.) in developing countries, asserting new leadership in the global green transition.
Analyzing the Numbers: China’s Overseas Energy Portfolio
Analysis from the China Global Power Database and research institutions offers a data-driven perspective on the impact of this pivot:
- Historic Coal Dominance: Between 2000 and 2021, coal made up over 33% of the total overseas power generation capacity financed by China, surpassing hydropower (30%) and gas (17%).
- Post-Pledge Shifts: From 2022 onward, Chinese financiers have not committed funding for new coal power, accelerating investment trends toward wind, solar, and other renewables.
- Pipeline Persistence: Many coal projects that were in the pipeline before the policy remain active and are likely to continue emitting CO2 for decades.
What others are reading
| Energy Source | Share (2000-2021) | Share (2022-2023) |
|---|---|---|
| Coal | 33.2% | 0% |
| Hydropower | 30.6% | Up |
| Wind/Solar | 9.8% | Significantly Up |
| Oil & Gas | 22.1% | Down |
Source: Analysis based on China’s Global Power Database, Boston University GDP Center
Policy Implementation and Challenges
Implementation of the coal financing freeze involves several steps and complexities:
- New Guidelines: The National Development and Reform Commission (NDRC) issued guidelines in March 2022, clarifying the cessation of new coal financings abroad and encouraging Chinese companies to “go global” with renewables.
- Existing Projects: The guidelines urged a “cautious” approach for projects already under construction, focusing on compliance, legal commitments, and negotiated exits where feasible.
- Financial Realignment: Both public and private Chinese investors are gradually ramping up support for greenfield renewable projects across Asia, Africa, and Eastern Europe, signaling alignment with national policy.
Global Implications: What Does This Mean for Coal and Climate?
China’s move marks a decisive shift in global energy finance:
- Coal Power Slowdown: With China as the main financier stepping back, many planned coal plants may now be cancelled or left unfunded. Already, nearly 43 gigawatts of coal power capacity linked to Chinese finance have been cancelled since the pledge.
- Emission Reductions: Curtailing new coal projects abroad could cut annual global CO2 emissions by an estimated 200 million tonnes.
- Market Shifts: China’s withdrawal is pressuring other global financial institutions and governments to accelerate their own transitions away from coal and fossil fuel investments.
- Developing Countries: The shift presents both challenges and opportunities for developing nations. While some projects face uncertainty, new pathways are emerging for low-carbon development, energy access, and clean technology transfer from China.
Successes, Setbacks, and Mixed Progress
Progress since the pledge has been significant—but not without challenges:
- Cancelled vs. Active Projects: According to a 2024 report, 42.8 GW of Chinese-financed overseas coal capacity has been cancelled, but 49.5 GW remains under construction or otherwise active.
- No New Coal Since 2021: No confirmed new coal plants have been financed by Chinese state or commercial banks since the announcement—even as some old projects continue toward completion.
- Broader Trends: Overall energy finance is declining, not just for coal but for all energy sectors, reflecting broader global economic conditions and renewed focus on risk management.
From Coal to Clean: China’s Shift to Green Energy Abroad
Central to China’s new strategy is the rise of green energy investment:
- Chinese foreign direct investment and development finance are increasingly flowing to wind, solar, hydroelectric, and other renewable projects overseas.
- The Green Investment and Finance Partnership (GIFP), launched during the 2023 Belt and Road Forum, aims to strengthen sustainable energy infrastructure and support the energy transition in developing countries.
The “green shift” supports global efforts to meet Paris Agreement targets, closing the gap in clean energy financing where it’s needed most.
Opportunities and Risks for Developing Nations
The impact of China’s new coal policy is most acutely felt in the developing world:
- New Opportunities: Many recipient countries welcome Chinese support for renewables, with large-scale solar parks and wind farms now under discussion or construction in Africa, Central Asia, and Southeast Asia.
- Transitional Risks: However, abrupt policy shifts can disrupt local energy planning and economic development, especially where coal projects were central to national grid strategies.
- Just Transition: The success of the green transition will depend on how effectively China and partners manage financial, technical, and social support for countries moving away from coal dependence.
China’s Domestic Coal Landscape: The Next Policy Frontier?
While the decision covers only overseas coal plants, China’s domestic coal usage remains significant. The country is still the largest producer and consumer of coal worldwide, with energy security concerns and rising electricity demand presenting challenges for stronger domestic policy changes. Many climate advocates argue that bold domestic action is the logical next step for China as it seeks global climate leadership.
Key Stakeholders and Their Roles
- Chinese Public Banks: Entities like the Export-Import Bank of China and China Development Bank are crucial for implementing the new rules and financing decisions.
- Private Investors: Increasingly active in renewable projects, they are pivotal to China’s green shift abroad.
- Recipient Countries: Their ability to adapt plans and capitalize on renewable opportunities will shape outcomes in regions formerly reliant on Chinese coal finance.
- International Institutions: Multilateral organizations and Western states may step in to bridge gaps in financing, technology, and policy support.
Looking Ahead: A Catalyst for Global Energy Transformation
China’s coal financing ban could be a catalyst for global energy transformation if major economies, financial institutions, and recipient countries follow suit in prioritizing clean development, phasing out fossil fuel dependence, and jointly pursuing a just, inclusive energy transition.
Frequently Asked Questions (FAQs)
Q: Does China’s pledge apply to all coal plants worldwide?
A: No; it covers only new Chinese-financed coal plants abroad. Projects already under construction before September 2021 and all domestic Chinese coal power are excluded.
Q: Will China continue to fund other fossil fuel projects overseas?
A: While coal investments are halted, some Chinese financiers can still support oil and gas projects. However, the overall trend is shifting to renewables and low-carbon energy.
Q: How significant is this move for global climate goals?
A: Extremely significant. China was the world’s top source of new overseas coal finance, and its withdrawal could prevent hundreds of millions of tonnes of CO2 emissions yearly while redirecting investment into clean technologies.
Q: Are other countries making similar pledges?
A: Yes. The US, UK, and several European nations have made parallel commitments, and multilateral banks are restricting fossil fuel lending. The scale and pace, however, differ from China’s global influence.
Q: Is there a risk of policy reversal or loopholes?
A: Enforcement depends on regulatory clarity and the political climate in China. Some critics warn of potential loopholes via third-party partnerships or special purpose vehicles, necessitating ongoing vigilance and transparency.
References & Data Sources
- Business & Human Rights Resource Centre
- Boston University Global Development Policy Center Policy Brief
- UN General Assembly transcripts and Global Energy Monitor reports
References
- https://www.business-humanrights.org/en/latest-news/bank-of-china-pledges-to-end-funding-for-foreign-coal-mining-and-power-plants/
- https://www.business-humanrights.org/en/latest-news/china-pledges-not-to-build-new-coal-power-projects-abroad/
- https://www.bu.edu/gdp/2025/04/28/no-new-coal-a-shift-in-the-composition-of-chinas-overseas-power-plant-portfolio/
- https://www.bu.edu/gdp/files/2025/04/GCI-PB-25-CGP-2025-FIN.pdf
- https://energyandcleanair.org/publication/three-years-later-impacts-of-chinas-overseas-coal-power-ban/
- https://www.tbsnews.net/world/china-sets-first-absolute-target-cut-climate-emissions-2035-1245116
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