SHANGHAI: Nearly all internationally available development financing is now committed to reducing or ending investment in coal-fired power after moves by China and the G20 to stop supporting new projects overseas, new research showed on Tuesday (Nov 2).
Just before a new round of climate talks began in Glasgow, the G20 nations pledged on Sunday to end finance for all coal-fired power plants overseas. It followed a similar commitment made by Chinese President Xi Jinping to the United Nations General Assembly in September.
According to new research from Boston University's Global Development Policy Center, the G20 pledge means that 99 per cent of all development finance institutions are committed to cutting coal investment and raising support for renewables.
"If these institutions live up to their commitments, it will be easier for developing countries to find official finance for renewable energy and coal power phase-out than for building new coal-fired power plants," said Rebecca Ray, senior researcher at the GDP Center and one of the study's authors.
The study said only three major "holdouts" remain - the Development Bank of Latin America, the Islamic Development Bank and the New Development Bank - though many of the major shareholders in those institutions were part of the G20 pledge.
Xi's September announcement that China would no longer be involved in overseas coal projects was the most significant change so far, depriving coal-fired power of its biggest financial backers, including the China Development Bank and the Export-Import Bank of China, the study said.
The decision appears to have had an immediate effect on the country's financial institutions, with the Bank of China vowing to end new overseas coal mining and power projects starting in October.
One expert involved in drawing up guidelines to decarbonise China's Belt and Road investments said Chinese financial institutions were aware of the waning demand for coal-fired power, making it easier for Xi's order to be implemented.
"They are quite serious about it," said the expert, who did not want to be named because of the sensitivity of the matter. "They are not looking for excuses to continue the projects; they are looking for reasons not to continue."
With coal already struggling to compete with renewables - and many analysts forecasting that the sector will eventually consist of billions of dollars worth of "stranded assets" - China's decision to pull out represented a rare alignment of political, economic and climate interests, analysts said.
"The economics have changed, and their experience with financing coal with the Belt and Road Initiative wasn't good - there are already issues with host countries defaulting on debt," said Matt Gray, an analyst with the climate think tank TransitionZero.
"I think they now have the political signals (to stop investing) that they have been crying out for all along."