No New Coal: A Shift in the Composition of China’s Overseas Power Plant Portfolio?

In September 2021, Chinese leader Xi Jinping pledged that China would stop financing new overseas coal-fired power plants and instead pledged to ramp up support for renewable energy projects. This announcement marked an important shift in China’s global energy policy, with potential to fill the glaring gaps in the financing necessary for the energy transition in developing countries.

An update to the China’s Global Power (CGP) Database, managed by the Boston University Global Development Policy Center, introduces new data on China’s overseas power plant portfolio. A new policy brief by Diego Morro, Ishana Ratan, Jiaqi Lu and Kevin P. Gallagher evaluates the implementation of China’s 2021 pledge and offers both a recent and historical overview of China’s overseas power plants in terms of capacity, carbon dioxide (CO₂) emissions, energy composition and investors.

The authors find, for the first time, the composition of Chinese overseas energy finance for both foreign direct investment (FDI) and development finance institutions (DFIs) has shifted to green energy, and there has been no new investment in coal-fired power plants since 2021. However, this finding is complicated by two other key factors: first, the data shows an across-the-board downward trend in overall energy investment, and second, the overall stock remains heavily carbon intensive. New coal plants that were already in the pipeline before China made its pledge are still coming online and will emit carbon dioxide for decades going forward.

Launched in 2020, the CGP Database tracks global power plants outside of China financed by FDI and/or lending from China’s two DFIs—the Export-Import Bank of China (CHEXIM) and the China Development Bank (CDB). The CGP Database also tracks and displays the deal types, Chinese investors and/or lenders, percentage of ownership by investor, amount of capacity in megawatts (MW), type of technology, operating status and the estimated annual CO₂ emissions of Chinese financed overseas power plants.

Main findings:

Recent trends: Post-2021 funding

• In 2022-2023, Chinese financiers committed nearly 5 GW of new capacity, mainly driven by greenfield investors (93 percent).
• New funding for coal has stopped. This shift indicates that Chinese DFIs, mergers and acquisitions (M&A) and greenfield investors are honoring Xi Jinping’s 2021 pledge to halt financing for new coal-fired power plants abroad.
• However, new developments in coal power projects announced before 2021 suggest that coal may continue to represent a significant part of China’s overseas power portfolio. Between 2022-2023, 8 GW of coal capacity became operational, with an additional 9 GW either planned or under construction, representing 19 percent of the capacity in the pipeline.
• Over 68 percent of overseas generation capacity funded in 2022 and 2023 was allocated to solar and wind renewable energy projects. In comparison, nearly 13 percent was directed towards solar and wind between 2000 and 2021.

Figure 1: Chinese FDI and DFI Capacity by Energy Source, 2001-2021

Figure 2: Chinese FDI and DFI Capacity by Energy Source, 2022-2023

• This shift does not represent a significant ramp-up in renewables, as the scale of financing remains relatively small—total renewable energy capacity funded between 2022 and 2023 is only 3 GW.

Overall trends: Cumulative capacity, emissions and investment profile

• Capacity: From 2000-2023, Chinese DFIs and investors backed 177 GW of power plant capacity, equal to roughly 6 percent of China’s domestic electricity capacity. Seventy-five percent of this total capacity is already operational, while 25 percent is still under construction or in the planning stage. Financing is spread over 1,542 power units, representing 745 power plants in 96 countries.

Figure 3: Energy Composition of Chinese DFI and FDI Capacity by Status, 2000-2023

• The overall stock of China’s global power plants is still relatively carbon intensive, as fossil fuel projects represent 56 percent of cumulative operational capacity. Of this operational capacity, coal is the largest contributor at 36 percent. The next largest source is hydropower at 27 percent. Solar and wind total 14 percent while gas, nuclear, oil and other renewables (biomass, geothermal and waste) make up the remaining share.
• Emissions: In 2023, annual emissions from Chinese-funded power plants reached 287 million tons (Mt) of CO₂, which is roughly equivalent to the annual energy-related CO₂ emissions from the entire country of Malaysia or the United Arab Emirates (UAE).
• If plants currently under construction and planning come online, they will contribute an additional 53 Mt of CO₂ emissions, which would be analogous to the annual emissions of Austria.
• Investment Profile: From the launch of the Belt and Road Initiative (BRI) until the onset of the COVID-19 pandemic (2013-2019), Chinese investments averaged an annual capacity of approximately 16 GW, but this has fallen to 4 GW from 2020-2023. Both DFIs and investors have scaled back their involvement in overseas markets since reaching a peak in 2016.

Figure 4: Chinese DFI and FDI Capacity by Deal Type, 2000-2023

• Chinese DFIs contributed 69 percent of the total coal power generation capacity and 40 percent of that of hydropower.
• Ninety-seven percent of wind and 96 percent of solar capacity financed by China came from FDI (greenfield and M&A).
• Greenfield and M&A portfolios are more diverse by energy source than DFIs, which are concentrated in coal and hydropower.
• Regionally, Asia receives the most Chinese funding in terms of capacity, primarily in coal power. The Americas and Africa follow, with hydropower as the most common energy source in both regions.
  • Wind and solar greenfield and M&A investments are heavily concentrated in the Americas (33 percent) and Asia (29 percent). Africa is only receiving 4 percent of the total renewable energy capacity contributed by Chinese firms.

China’s global energy financing is increasingly aligned with the green transition, but coal may continue to represent a significant part of China’s overseas power portfolio as previously announced projects continue to come online. Still, initiatives such as the Green Investment and Finance Partnership (GIFP), announced at the 2023 Belt and Road Forum, hold the potential to advance sustainable development, helping developing countries achieve their green energy objectives.