China’s halt to coal funding could halt Zimbabwe’s energy plans

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South China Morning Post


If there is one country that is likely to be the most affected by President Xi Jinping’s decision to stop building new power plants abroad, it is Zimbabwe.

Among several African countries with large coal deposits, it is heavily dependent on China after the United States and some European countries imposed sanctions on it over human rights violations by former President Robert Mugabe and the policy of seizing land from white farmers.

It planned to build several coal-fired power plants at a total cost of US $ 15 billion, with Chinese lenders initially pledging to do so. Private funding was not available, in part because of growing opposition from environmental activists.

But on Tuesday, in a pre-recorded speech to the United Nations General Assembly, Xi sounded the death knell for several coal projects, notably in Zimbabwe, for which Chinese lenders were to provide financing.

Chinese cash funds African coal plants despite environmental concerns

The southern African nation’s demand for electricity exceeds its supply, leading it to look to build more power plants. Its electricity shortage means it cannot attract energy-intensive manufacturing companies.

Xi’s pledge could halt dozens of coal-fired power projects in Africa, although there has already been a noticeable slowdown in new funding since Xi announced a goal of net zero emissions last year. here 2060.

China is the largest funder of overseas coal-fired power plants as well as the largest producer and consumer of coal.

But Beijing did not fund any overseas coal projects in the first half of this year, and the country’s largest funder for such projects, the Industrial and Commercial Bank of China, has said it will start. phase out coal from its portfolio.

The bank refused in July to finance the US $ 3 billion Sengwa coal project in northern Zimbabwe, as pressure from activists and communities increased.

Independent climate change think tank E3G says Zimbabwe is among the laggards – including Botswana and Mozambique as well – who continue to seek coal-fired power plants, going against the global trend to pull out or not to finance the destructive energy source for the environment.

The Zimbabwean government has made its voice heard in its continued quest for new coal even as Chinese financiers pull back, E3G said in its latest report on the collapse of the global coal pipeline.

The country has 990 megawatts of coal-fired power plants under construction and 4.5 GW planned, but the funding freeze by the Chinese government will likely force it to seek other sources of funding or to switch to solar and hydropower. .

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Besides Zimbabwe, Botswana and Mozambique, Kenya, Djibouti, Madagascar, Malawi and South Africa could be forced by the Chinese hub to delay their coal-fired power projects.

Xi’s statement means that “existing and agreed projects will be honored but new projects will not be on the table,” said Yun Sun, director of the China program at the Stimson Center in Washington.

Groundwork, an environmental justice organization working in South Africa, praised Xi’s statement, calling it a victory for thousands of community activists in countries such as Zimbabwe, Kenya, Ghana, Senegal, Côte d ‘Ivory and South Africa who had “defied their governments and China, and said no to coal”.

“We challenge President Xi to end support for all Chinese institutions (…) that maintain coal mines, factories and other infrastructure under construction or planned in Africa,” Groundwork said.

Lauri Myllyvirta, senior analyst at the Clean Air and Energy Research Center, said the announcement signaled a major policy shift for China and “leaves no international funding for new coal.”

“To make new commitments to finance or take equity stakes in overseas coal-fired power projects would be toxic to any Chinese bank or power company,” Myllyvirta said.

“For projects that have not yet reached financial close, this is probably the end of the story.”

However, Myllyvirta said it was not yet clear what forms of involvement in coal-fired power projects had been ruled out and where the line would be drawn for projects that were already underway.

According to the Boston University Global Development Policy Center, the Chinese state has funded coal projects worth US $ 43 billion since 2000, mostly in Asia and southern Africa.

“Now that the world’s major governments have taken the lead in banning coal-fired power plants abroad, it’s time for the private sector, which finances 87% of overseas coal, to follow suit.” , said Kevin Gallagher, director of the center.

“We will not meet our global climate and development goals if the private sector continues to fund coal from overseas.”

Chinese cash funds African coal plants despite environmental concerns

Christoph Nedopil Wang, founding director of the Green Belt and Road Initiative Center, said Chinese financial institutions and engineering companies have historically been an important source of funding and engineering capacity for overseas coal development. .

“The door was closed at [governments] in coal-rich countries to seek Chinese financing and engineering in new coal projects, ”Wang said.

But he said there was no clarity yet on whether the announcement would halt already announced coal-fired projects.

Rishikesh Ram Bhandary, an expert in climate finance and international climate negotiations, said China’s move was “likely to strengthen voices calling for a greater focus on renewable energy in these countries.” However, he said he was unlikely to have an immediate impact on South Africa and Zimbabwe.

“As our database shows, the coal-fired power plants funded by China’s strategic bank are already under construction or in operation,” he said.

“Of course, we need more details from the Chinese government to fully understand what the announcement includes and excludes.

“With the last major source of public funding for coal-fired power plants removed, countries like South Africa and Zimbabwe will need to think carefully about the policies they need and the infrastructure needed to dramatically develop renewable energy. “

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