China’s Net Zero promise looks elusive as banks keep throwing cash at coal mines and power plants
China’s coal mines, coal-fired power plants are still growing, funded by an endless stream of cheap financing by the nation’s state-owned banks, as they keep one of the country’s biggest industrial sectors humming amid an economic slowdown.
On an unseasonably warm autumn day last October, the world’s largest coal-fired power plant fired up in the Anhui provincial city of Huaibei in eastern China.
Sitting in an economic development zone carved out of verdant paddy fields, phase two of Shenergy Group’s Pingshan power plant is installed with 1,350 megawatts of generation capacity, enough to meet the annual needs of 1.1 million households. Almost four years after receiving the construction approval, the plant was formally connected to the national grid in mid-December.
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The Chinese government and the nation’s state-owned power producers have set aggressive goals on renewable energy, but plans to retire or rein back coal-powered plants – they produce a third of China’s carbon emission – failed to keep up. China commissioned 38.4 gigawatts (GW) of coal plants in 2020, three times the 11.9GW fired up by the rest of the world, according to a February report by the Global Energy Monitor in San Francisco and the Centre for Research on Energy and Clean Air (CREA) in Helsinki.
After accounting for shutdowns, China’s net addition last year was 29.8GW, compared with the world’s net reduction of 17.2GW. The pace of construction approvals have also tripled to 36.9GW last year alone, five times more than those initiated outside China, according to the report.
“That has put the central government’s emphasis on new climate commitment in a bad light,” said Greenpeace East Asia’s climate and energy project manager Zhang Kai in Beijing.
“If the central government allows the current levels of coal plant development to be maintained, it will at best divert important resources away from its clean energy transition, and at worst make China’s carbon neutral goals difficult if not impossible to achieve,” said the Global Energy Monitor-CREA report.
China’s coal mines, coal-fired power plants are still growing, funded by an endless stream of cheap financing by the nation’s state-owned banks, as they keep one of the country’s biggest industrial sectors humming amid an economic slowdown. Millions of jobs and trillions of yuan of assets are at stake in the coal industry.
The nation’s big five state-owned power firms, generating more than half of China’s coal-fired electricity – State Energy Investment Group, China Huaneng Group, China Datang Group, China Huadian Group and State Power Investment Group – employ 2 million people, and have 5.5 trillion yuan (US$836 billion) of assets between them.
As many as 60 of the world’s largest banks lent or underwrote US$752 billion of debt or equity issuances to the fossil fuel industry last year, down by 9 per cent from 2019 but 6 per cent higher than 2016 when the Paris Agreement took effect, according to a March 24 study by six non-government organisations (NGOs) including the Rainforest Action Network and BankTrack.
“The overall fossil fuel financing trend of the last five years is still heading definitively in the wrong direction, reinforcing the need for banks to establish policies that lock in the fossil fuel financing declines of 2020,” the coalition said.
American and Canadian banks led almost half of the US$3.8 trillion in global fossil fuel financing deals over the past five years. European, UK, Chinese and Japanese financial institutions pale in comparison, but their financing volume rose during the period, with Chinese financing rising by a third to almost US$160 billion, according to the data.
While US banks are among the biggest oil and gas funders, Chinese financial institutions lead on coal mining and coal-fired power plants financing. This was echoed by findings from a separate research by 29 NGOs including Urgewald and Reclaim Finance, which tracked loans provided by 380 banks, as well as stock and bond issuances underwritten by 427 financial institutions that helped sustained 934 coal mines and power producers.
Japanese banks are the top lenders, while Chinese financial institutions are the biggest shares and bond underwriters to coal companies, the NGOs said.
Coal financing led by Chinese institutions – including projects in many developing nations – grew to US$222 billion in the first 10 months of 2020 – almost half the global total, more than the US$215 billion for the whole of 2019, the NGOs said.
“Banks in Japan and China, such as the Industrial and Commercial Bank of China (ICBC) must support their countries’ climate goals by withdrawing coal investments, not just within their countries but also abroad,” said Chuck Baclagon, a finance campaigner at 350.org, an environmental advocacy group in East Asia.
China’s National Energy Administration has implemented a “traffic light system” since 2016 to classify and impose restrictions on domestic coal power projects, while the bank regulator ordered Chinese banks to reduce lending to certain emission-prone and energy-intensive sectors including coal electricity since 2007. But the implementation has been criticised as poor.
China’s Ministry of Ecology and Environment recently endorsed a plan to extend the policies to Chinese-invested energy projects overseas based on their environment and climate impact, Liu Shuang, a senior associate at Washington-based World Resource Institute said.
“There’s clear evidence that looser standards in the National energy Administration’s early warning system and the coal approval spree are connected,” said Zhang of Greenpeace. “