No more coal abroad! Unpacking the drivers of China's green shift in overseas energy finance

Ying Wang; Chuyu Liu; Yixian Sun

doi:10.1016/j.erss.2024.103456

No more coal abroad! Unpacking the drivers of China's green shift in overseas energy finance

Ying Wang, Chuyu Liu, Yixian Sun

Research output: Contribution to journal › Article › peer-review

6 Citations (SciVal)

Abstract

Over the last decade, China's development finance for coal-fired power plants has been seen as a major barrier to clean energy transition in developing countries. In September 2021, Chinese President Xi Jinping announced that China would stop supporting new coal projects abroad. This pledge was made beyond the expectation of many observers as it seems to deviate from China's long-standing approach of non-interference in its overseas development programme. What explains this striking policy shift? Drawing upon the literature on two-level games and the political economy of China's overseas investment, we developed a novel analytical framework, which argues that China's new policy is the combined outcome of three mechanisms: issue linkages in intergovernmental bargaining, lobbying of transnational alliances, and influence of domestic interest groups seeking policy change. We used elite interviews, policy documents, and media reports to show the processes through which the changing market and political environments since 2017 led China's leadership to make the commitment to phase out overseas coal finance in 2021. Our study contributes to the burgeoning literature on China's influence on global energy transition by unpacking the complex policy-making processes of Chinese overseas investments and identifying different forces shaping the emerging sustainability governance system for China's global engagement.

Original language	English
Article number	103456
Number of pages	13
Journal	Energy Research and Social Science
Volume	111
Early online date	16 Feb 2024
DOIs	https://doi.org/10.1016/j.erss.2024.103456
Publication status	Published - 31 May 2024

Data Availability Statement

The data that has been used is confidential.

Funding

Since the mid-2000s, China has quickly become a major player in the global energy market as a primary financier of large infrastructure projects. Over the past decade, two of the leading Chinese policy banks – China Development Bank and the Export-Import Bank of China – have provided more overseas finance for power generation projects than the World Bank and other major multilateral development banks combined [ 1 ]. 1 1 While China's role as the largest public finance provider in the global electricity sector may give Chinese financial institutions opportunities to promote energy transition in developing countries if their investments were directed to renewables (e.g., wind and solar), the majority of Chinese energy investments have been allocated to fossil fuels, particularly coal-fired power plants [ 3 ]. Between 1999 and 2020, coal-fired power plants accounted for 58 % of the current installed capacity funded by Chinese development institutions (including two leading Chinese policy banks, twenty China-led regional and development funds, Asian Infrastructure Investment Bank, and New Development Bank) and 52 % of the capacity in the pipeline, and in comparison only 12 % of the current capacity and 8 % of the pipeline capacity financed by Western-backed multilateral development banks are coal [ 2 ]. Meanwhile, in contrast to its strong domestic commitments to promoting low-carbon development and Western financiers' transitions towards green investment, Beijing remained hesitant to shift its overseas energy finance towards renewables for an extended period [ 4 , 5 ]. This trend persisted throughout the past decade, despite Beijing's own vision to green its Belt and Road Initiative (BRI) [ 6 , 7 ]. Consequently, China's overseas energy investments have often been seen as a major obstacle to low-carbon transition in the Global South.

Keywords

China
Climate governance
Coal
Green development
Overseas energy finance

ASJC Scopus subject areas

Energy Engineering and Power Technology
Fuel Technology
Nuclear Energy and Engineering
Social Sciences (miscellaneous)
Renewable Energy, Sustainability and the Environment

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.erss.2024.103456Licence: CC BY

Cite this

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title = "No more coal abroad! Unpacking the drivers of China's green shift in overseas energy finance",

abstract = "Over the last decade, China's development finance for coal-fired power plants has been seen as a major barrier to clean energy transition in developing countries. In September 2021, Chinese President Xi Jinping announced that China would stop supporting new coal projects abroad. This pledge was made beyond the expectation of many observers as it seems to deviate from China's long-standing approach of non-interference in its overseas development programme. What explains this striking policy shift? Drawing upon the literature on two-level games and the political economy of China's overseas investment, we developed a novel analytical framework, which argues that China's new policy is the combined outcome of three mechanisms: issue linkages in intergovernmental bargaining, lobbying of transnational alliances, and influence of domestic interest groups seeking policy change. We used elite interviews, policy documents, and media reports to show the processes through which the changing market and political environments since 2017 led China's leadership to make the commitment to phase out overseas coal finance in 2021. Our study contributes to the burgeoning literature on China's influence on global energy transition by unpacking the complex policy-making processes of Chinese overseas investments and identifying different forces shaping the emerging sustainability governance system for China's global engagement.",

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Y1 - 2024/5/31

N2 - Over the last decade, China's development finance for coal-fired power plants has been seen as a major barrier to clean energy transition in developing countries. In September 2021, Chinese President Xi Jinping announced that China would stop supporting new coal projects abroad. This pledge was made beyond the expectation of many observers as it seems to deviate from China's long-standing approach of non-interference in its overseas development programme. What explains this striking policy shift? Drawing upon the literature on two-level games and the political economy of China's overseas investment, we developed a novel analytical framework, which argues that China's new policy is the combined outcome of three mechanisms: issue linkages in intergovernmental bargaining, lobbying of transnational alliances, and influence of domestic interest groups seeking policy change. We used elite interviews, policy documents, and media reports to show the processes through which the changing market and political environments since 2017 led China's leadership to make the commitment to phase out overseas coal finance in 2021. Our study contributes to the burgeoning literature on China's influence on global energy transition by unpacking the complex policy-making processes of Chinese overseas investments and identifying different forces shaping the emerging sustainability governance system for China's global engagement.

AB - Over the last decade, China's development finance for coal-fired power plants has been seen as a major barrier to clean energy transition in developing countries. In September 2021, Chinese President Xi Jinping announced that China would stop supporting new coal projects abroad. This pledge was made beyond the expectation of many observers as it seems to deviate from China's long-standing approach of non-interference in its overseas development programme. What explains this striking policy shift? Drawing upon the literature on two-level games and the political economy of China's overseas investment, we developed a novel analytical framework, which argues that China's new policy is the combined outcome of three mechanisms: issue linkages in intergovernmental bargaining, lobbying of transnational alliances, and influence of domestic interest groups seeking policy change. We used elite interviews, policy documents, and media reports to show the processes through which the changing market and political environments since 2017 led China's leadership to make the commitment to phase out overseas coal finance in 2021. Our study contributes to the burgeoning literature on China's influence on global energy transition by unpacking the complex policy-making processes of Chinese overseas investments and identifying different forces shaping the emerging sustainability governance system for China's global engagement.

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KW - Climate governance

KW - Coal

KW - Green development

KW - Overseas energy finance

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No more coal abroad! Unpacking the drivers of China's green shift in overseas energy finance

Abstract

Data Availability Statement

Funding

Keywords

ASJC Scopus subject areas

UN SDGs

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