Phasing out coal

Published September 27, 2021

IN what is seen as one of the most significant developments on the climate front this year, China has pledged to end public financing for coal-fired power stations overseas ahead of the COP26 UN climate change summit beginning in November. The announcement is in line with global efforts aimed at reducing the sources of dirty energy in order to cut down carbon emissions and arrest global warming.

China has for some years been under tremendous pressure to up its game to help the world control climate change. The pressure increased after Japan and South Korea, the other two major financiers of overseas coal power projects, announced they would stop funding such projects earlier this year. China has vowed not only to halt its funding for coal power overseas but also to help developing countries build green energy production. That is good news since China has now become a leader in cheaper solar and wind power technology.

What implications will Beijing’s decision to turn off its taps for coal energy have for several countries, including Pakistan where it has already committed heavy financing of $50bn for both under-construction and planned projects?

Read: Why is Pakistan opening up new coal power plants, even as the world says goodbye to coal?

The answer is unclear at the moment as the details of China’s plans are not available. It is also not clear if the prohibition applies to private Chinese investment in coal overseas as well. China is Pakistan’s largest investor and contractor of energy projects, most of which are coal-fired plants. Priority CPEC power schemes total 11.1GW in capacity and $18.6bn in investment, with almost three quarters or 8.22GW based on coal involving a debt of $8.7bn from Chinese banks. The main repercussions are likely to affect CPEC and non-CPEC projects totalling 4.1GW in Gwadar, Thar, Jamshoro and Arifwala involving Chinese and local investment of over $5bn.

Even if the new Chinese policy doesn’t affect these future investments in coal energy, it has afforded Pakistan an opportunity to renegotiate these deals with Beijing to convert them into cheaper, clean energy projects. Islamabad should take up this matter with China since Prime Minister Imran Khan has already pledged to phase out coal power and shift to greener energy production by 2030. He had announced a moratorium on coal at the Climate Ambition Summit held to mark the fifth anniversary of the Paris Climate Agreement in December last year where the world had pledged a stronger climate action. His statement had received international acclaim but nothing has so far been done on this front at home.

The emerging global situation and China’s exit from coal offers a wide open window for Islamabad to start implementing the promised phase-out. Renegotiating to replace coal power deals with green energy agreements may not be easy. But it will not be impossible to convince Chinese firms. After all, it will be a test of their commitment to the world as well.

Published in Dawn, September 27th, 2021

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