PARIS, Oct 05 (IPS) – President Xi announced last month that China is stopping its financing for new coal-fired strength plants overseas. With this announcement from Beijing, the governments of the world’s largest economies have now achieved a consensus to stop their overseas funding of coal plants in developing countries, thereby advancing global efforts to reduce future carbon dioxide (CO2) emissions.
Energized by this success on climate, these governments should now turn their efforts to mobilizing the enormous financing required to build the clean strength projects that the developing world nevertheless needs to fight poverty.
Globally, nearly 30% of the energy sector’s CO2 emissions come from coal-fired strength plants. already as various developed countries moved to reduce their own coal use to lower emissions domestically, new coal strength plants were being hypothesizedv across the developing world, often with financing from China under its enormous Belt and Road Initiative.
As China, in addition as notably Japan and South Korea, funded coal plants oversea (cumulatively providing 90% of overseas public sector financing), climate specialists raised the alarm that these new plants would threaten global emissions reduction efforts.
Given these concerns, the EU, the U.S. (beginning under Biden) ) and others have been campaigning for governments to end their financing for new overseas coal-fired projects. China’s announcement last month, following on similar ones by South Korea and Japan (in addition as the G-7) earlier this year, represents the culmination of a successful international campaign against this financing.
already though there are other supplies of financing for coal strength plants (by some estimates, significantly larger than China’s), the decisions by Beijing, Tokyo and Seoul, in addition as the similar international effort among private edges and other financial institutions, will considerably slow new coal strength investments in the developing world.
For example, it has been estimated that China’s new commitment could impact 44 strength projects in Asia and Africa, resulting in a cut of $50 billion in investment. additionally, the U.S. recently announced that it would oppose any new coal-based projects by multilateral development edges (MDBs), shutting off another source of possible financing.
And however this success presents its own challenges, at the minimum for poorer countries that were looking to assistance from the additional electricity these coal plants would provide. For example, the International Energy Agency (IEA) foresees that Africa’s electricity generation will need to more than double over the next 20 years under a business-as-usual case, and more than triple under a high development scenario.
To unprotected to this high development scenario, Africa will need to add about 700 gigawatts in new plants, which is nearly three times the continent’s existing installed generating capacity. Similarly, the IEA projects that the countries of the ASEAN vicinity (such as Indonesia and Vietnam) will in the aggregate need to invest $350 billion in the strength sector between 2025 and 2030 to further their economic development, a figure that rises to $490 billion under the Agency’s low-carbon scenario.
But will poorer countries be able to mobilize the financing for these electricity investments, especially as overseas financing for new coal plants disappears?
The U.S. and China have both recently announced their intention to increase funding to help developing countries meet the climate challenge, with Biden looking to double the U.S.’s annual contribution to $11.4 billion and Xi coupling his decision to end overseas financing for coal plants with a potential to step up China’s sustain for green and low-carbon investments in developing countries.
Unfortunately, there are concerns that poorer countries will nevertheless be left wanting, especially as past pledges to provide them financing have failed to fully materialize, notably the $100 billion per year in climate finance that developed countries committed to mobilize by 2020 to address the needs of developing countries.
To avoid this outcome and permit poorer countries to acquire the additional electricity they need, the successful diplomatic efforts that have gone into eliminating public funding for overseas coal projects need to be equaled, and already surpassed, by a excursion to raise funding for clean strength plants.
This should not only include increasing flows from the large development finance institutions of the U.S., China, the EU, Japan, etc. and from their other overseas investment agencies, but also mobilizing more private sector investment in developing countries, both foreign and domestic.
Non-traditional funders (including private foundations) also have a role to play. In addition, as the U.S. moves to block any coal projects and severely curtail other MDB investments in fossil fuel-based electricity, it and other wealthy nations should increase their shareholder contributions to these edges to increase lending to developing countries for clean electricity.
The rationale supporting these efforts is not only that the U.S., China, the EU, Japan, and South Korea are the world’s largest economies (representing over two thirds of global GDP), but also that they themselves continue to rely on coal plants to strength their own economic growth. These coal plants, in turn, are generating large amounts of emissions that are using up the shared carbon budget and leaving less room for electricity-related emissions from poorer countries.
For example, in 2019, 65% of China’s electricity came from coal-fired strength plants that generated 4.9 gigatons in CO2 emissions (GtCO2), while the U.S. emitted 1.0 GtCO2 and the EU 0.5 GtCO2 from these plants. By comparison, all of Africa’s coal-fired strength plants produced less than 0.3 GtCO2.
As a consequence, there are also important equity considerations which justify stronger action by these wealthier countries to sustain clean strength investments in poorer ones. While many also point to the need for wealthier nations to reduce their own domestic coal emissions, the focus of this article is not on how these countries choose to run their national strength systems, but rather on what poorer countries need and how wealthier ones can help.
As President Biden has repeatedly remarked, “climate change poses an existential threat to our future.” Ending investment in new overseas coal-fired plants will help to address this danger, for the assistance of both high and poor. But poverty is also an existential threat, albeit one that does not imperil everyone. Rather it is a life-threatening menace principally aimed at the poor of the developing world. It is also one which wealthier countries can help to counter.
To fight poverty, the developing countries of Africa, Asia and Latin America need a lot more electricity. In the interest of climate, wealthy countries have succeeded in cutting off coal financing to these regions. These wealthy countries now should build off this success by carrying out an already more ambitious poverty alleviation program funding clean strength across the developing world.
Philippe Benoit has over 25 years of experience working in international energy affairs, including prior management locaiongs at the World Bank and International Energy Agency. He is currently Managing Director-Energy and Sustainability at Global Infrastructure Advisory sets 2050
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