The Environmental Impact of China-financed Coal-fired Power Plants in South East Asia

According to World Bank research, about 1 billion people, roughly three times the population of the United States, still lack access to electricity. In poor countries where more sustainable electricity supply has the potential to foster higher economic growth, fossil fuel based power generation remains an attractive option. While multilateral development banks (MDBs) have ‘greened’ power-generation portfolios in the past decade, China recently became a major player, funding energy-related infrastructure in developing countries. While having the potential to alleviate energy poverty and fuel economic growth, coal-fired power plants can lead to serious environmental issues and potential health problems.

A new working paper by Yating Li and Kevin P. Gallagher examines the impact of Chinese financed coal plants on sulfur dioxide (SO2) emissions in four countries: India, Indonesia, Vietnam and Philippines. Concerned about the environmental impacts and potential health problems from coal-fired power plants, Li and Gallagher compare the pollution of China-financed coal plants to other coal plants in the region. 

Main findings: 

• When examining all the power plants together, Li and Gallagher find no significant difference in the SO2 emission levels for power plants financed by China.
• Among plants using subcritical technologies, meaning those with lower heat efficiency of around 40 percent, the authors observe the Chinese-financed coal-fired power plants lead to higher levels of SO2.
• On the other hand, plants using supercritical technology, meaning much higher heat efficiencies of around 46 percent, financed by China have been shown to be cleaner, but this finding was not statistically significant.
• Furthermore, Li and Gallagher find that for plants larger than 500 MW, China-financed coal-fired plants have a higher percentage of supercritical power plants. 
• Thus, while generally looser environmental regulations in recipient countries than in China leads to construction of subcritical power plants, Li and Gallagher argue energy finance from China could have a beneficial “spillover effect,” bringing cleaner technologies to developing countries. 

In order to design “greener” policies for Chinese energy finance, Li and Gallagher suggest further study on underlying mechanisms behind financing coal power plants, the extent of environmental monitoring by China and recipient countries, as well as further examination of the factors impacting the environmental performance of subcritical power plants financed by China.