Chart of the Week: Estimated Annual Emissions from Power Generation with Chinese Capital

According to estimates of China’s Global Power (CGP) Database compiled by the Global Development Policy Center, China’s fossil fuel power plants are currently leading to approximately 314 million tons (Mt) of CO₂emissions per year, which is about 3.5 percent of the annual CO₂ emission from the global power sector outside of China. Assuming all fossil fuel projects that are still under construction or under planning come online by 2030, they will add another 211 Mt to the annual CO₂ emissions.

As the chart below shows, carbon emissions from power plants with the participation of Chinese capital overseas started to rise in 2011, concurrent with the jump of capacity commissioned with participation of Chinese capital in the same year. Chinese foreign direct investment (FDI) and overseas development finance (ODF) made the most coal power investment in Southeast Asia, South Asia, and Africa, and are also leading to the most CO₂emissions in these three regions. By 2030, assuming all projects still under construction or under planning come online, and assuming no retirement, all power plants with participation of Chinese capital overseas in these three regions will respectively lead to 178 Mt, 158 Mt, and 89 Mt of CO₂ emissions per year.

Source: China’s Global Power Database, 2020.

These three regions are also among the top recipient regions of Chinese FDI and ODF in the power generation sector. However, power plants with Chinese FDI or ODF in Latin America, totaling a greater capacity than those in Africa, produce very low carbon emissions. This is because Chinese companies and development banks have invested in mostly participated in hydropower and other forms of renewable energy in Latin America, with very few coal plants receiving financing. This provides a potential case study for scaling up investment and finance in renewable energy across regions and financial institutions.

The CGP Database shows that 57 percent of the power generation capacity with the participation of Chinese FDI and ODF is fossil fuel-fired, with 40 percent coal power, 15 percent fueled by natural gas, and two percent by oil. This is not to ignore that 43 percent of the generation capacity that China has invested in overseas are in low carbon power. However, given that full alignment with the Paris Agreement requires the world to reduce CO₂ emission by 60 percent from the 2018 level by 2030, any continued support for fossil fuel projects will be undermining the future of sustainable development.

As China and a growing group of countries commit to stronger climate actions, Chinese investment and finance regulations need to step up internal standards for overseas economic activities, as part of the global effort of a green and resilient recovery in the coming years.