On 21 September 2021, President Xi Jinping announced at the United Nations General Assembly that China would not build new coal-fired power projects abroad.
One year on from announcing China’s carbon neutrality plan, President Xi (in a pre-recorded video) said: “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.”
Countries have been trying to produce an agreement to phase out coal fired power plants before the COP26 United Nations Climate Change Conference in order to meet the Paris Agreement goals (see here). President Xi’s announcement is seen as an important development in the lead up to COP26 in November.
Depending on how the policy is implemented and the timeframe for implementation, this decision could significantly impact the financing of coal fired power plants in the developing world. As there were few details surrounding President Xi’s announcement, there are questions as to whether this statement is a signal that investors should cease current projects under development and whether the intention is to cease all financial support to such projects (and, if so, when).
On 24 September 2021, the Bank of China published a statement on its website announcing that starting in the fourth quarter of 2021, the Bank of China will no longer finance new coal mining and new coal-fired power projects abroad, except for contracted projects. The decision by the Bank of China to stop financing the development of coal-fired power plants follows the European, American, Korean, Japanese and Singaporean banks who have already made this decision.
Carbon Neutrality Plan
In September 2020, President Xi Jinping announced at the United Nations General Assembly that mainland China would strive to hit peak carbon emissions by 2030 and achieve carbon neutrality by 2060. For a country generating the most greenhouse gas emissions in the world, these targets are perceived to be ambitious and should, in particular, boost investment in “green” industries such as renewable energy, waste treatment and/or related technologies.
Echoing the above directive, various ministerial level authorities issued guidance in October 2020 to promote investment and financing to address climate change, setting targets for 2022 and 2025 respectively. On 22 February 2021, the NDRC laid out the State Council’s plans for China’s carbon targets. These comprehensive political/social/economic plans show China’s ambition to establish and improve its low-carbon economic system by, among other tasks, stepping up the country’s push for research into large-scale power storage technology, and highlighting wind and solar, geothermal, hydrogen, biomass, tidal energy and hydropower as priority renewable sectors. On 5 January 2021, the environmental authority published pilot rules for the management of carbon emissions trading, which aims to regulate the carbon trade and related activities within China. On 28 January 2021, the Goldwind Technology Yizhuang smart park in Beijing was certified as the first renewable energy carbon-neutral smart park in mainland China.
Most state-owned power companies announced their own action plans in support of China’s carbon neutrality plan. State Power Investment Corporation, being the first state-owned energy giant which announced a timetable for reaching the peak of carbon emissions, announced its plan to achieve more than 60% of clean energy in its installed capacity by 2025, and increase it to 75% by 2035. State Grid Corporation announced on 27 January 2021 an annual budget of more than US$70bn to improve its grid assets to facilitate the shift towards more low carbon and clean energy sources.
These policies and developments signal support for foreign investment in these industries, including the development of innovative investment structures.