{"id":23701,"date":"2023-03-28T10:23:39","date_gmt":"2023-03-28T14:23:39","guid":{"rendered":"https:\/\/www.bu.edu\/gdp\/?p=23701"},"modified":"2026-09-15T15:08:28","modified_gmt":"2026-09-15T19:08:28","slug":"capitalizing-on-coal-early-retirement-options-for-china-financed-coal-plants-in-southeast-asia-and-beyond","status":"publish","type":"post","link":"https:\/\/www.bu.edu\/gdp\/2023\/03\/28\/capitalizing-on-coal-early-retirement-options-for-china-financed-coal-plants-in-southeast-asia-and-beyond\/","title":{"rendered":"Capitalizing on Coal: Early Retirement Options for China-Financed Coal Plants in Southeast Asia and Beyond"},"content":{"rendered":"<figure id=\"attachment23758\" aria-describedby=\"caption-attachment23758\" style=\"width: 646px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" src=\"\/gdp\/files\/2023\/03\/AC-Capitalizing-Coal-WP-636x424.jpg\" alt=\"\" width=\"636\" height=\"424\" class=\"size-medium wp-image-23758\" srcset=\"https:\/\/www.bu.edu\/gdp\/files\/2023\/03\/AC-Capitalizing-Coal-WP-636x424.jpg 636w, https:\/\/www.bu.edu\/gdp\/files\/2023\/03\/AC-Capitalizing-Coal-WP-1024x683.jpg 1024w, https:\/\/www.bu.edu\/gdp\/files\/2023\/03\/AC-Capitalizing-Coal-WP-768x512.jpg 768w, https:\/\/www.bu.edu\/gdp\/files\/2023\/03\/AC-Capitalizing-Coal-WP-1536x1024.jpg 1536w, https:\/\/www.bu.edu\/gdp\/files\/2023\/03\/AC-Capitalizing-Coal-WP-2048x1365.jpg 2048w\" sizes=\"(max-width: 636px) 100vw, 636px\" \/><figcaption id=\"caption-attachment23758\" class=\"wp-caption-text\">Hanoi, Vietnam. Photo by DzungPham via Shutterstock.<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">China is not alone in directing public financing to new coal-fired power across the globe. Yet, China\u2019s development finance institutions have played a significant role in commissioning and financing over 39GW of currently operating overseas coal power plants, largely in South and Southeast Asia within the past two decades.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If these plants are assumed to have operating lifetimes of 30 years, they would exist beyond the International Energy Agency\u2019s (IEA) 2040 phase-out target, outlined in the IEA\u2019s Net Zero Emissions by <\/span><a href=\"https:\/\/www.iea.org\/reports\/net-zero-by-2050\"><span style=\"font-weight: 400;\">2050 Scenario<\/span><\/a><span style=\"font-weight: 400;\"> (NZE 2050). To realize their climate ambitions and limit the social costs of climate change, China and host countries alike will have to consider early retirement of coal plants still in existence beyond 2040.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In a <em><strong><a href=\"https:\/\/www.sciencedirect.com\/science\/article\/abs\/pii\/S0306261926009931\" target=\"_blank\" rel=\"noopener\">journal article<\/a><\/strong><\/em> published in <em>Applied Energy<\/em><\/span><span style=\"font-weight: 400;\">, <\/span><a href=\"https:\/\/www.bu.edu\/gdp\/profile\/alex-clark\/\"><span style=\"font-weight: 400;\">Alex Clark<\/span><\/a><span style=\"font-weight: 400;\">, Abhinav Jindal, Gireesh Shrimali, <\/span><a href=\"https:\/\/www.bu.edu\/gdp\/profile\/cecilia-han-springer\/\"><span style=\"font-weight: 400;\">Cecilia Springer<\/span><\/a><span style=\"font-weight: 400;\"> and Ryan Rafaty analyze early retirement options for Chinese financed subcritical and supercritical coal power plants in three countries\u2014Pakistan, Indonesia and Vietnam. For these countries, Chinese finance has enabled a significant proportion of currently operating coal plants, while power markets remain highly regulated and electricity demand is rapidly rising.\u00a0<\/span><\/p>\n<h5><b>Main findings:<\/b><\/h5>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If avoided carbon emissions are valued at $100\/tCO<\/span><sub><span style=\"font-weight: 400;\">2<\/span><\/sub><span style=\"font-weight: 400;\">, the global economic and social benefits of retiring Chinese overseas coal plants ten years early could be $200 billion.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">An interest rate\/equity return requirement subsidy approach allows a plant to be retired 20 years early for $151 million, 20 percent less than the cost of a full buyout at $184 million.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The price on avoided emissions required to fully fund a subsidy for retiring a plant 20 years early is $12.5\/tCO<sub>2<\/sub>, falling to $2.8\/tCO<sub>2<\/sub><\/span><span style=\"font-weight: 400;\">, if retired ten years early.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Subsidizing investor returns may be a more effective use of concessional funding than full buyouts in securing early retirement, especially in the context of countries with growing electricity demand and relatively early-stage renewable energy buildout.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Providing an interest rate subsidy sufficient to allow early retirement, but for a long enough period of time to allow the host country to invest in replacement capacity, may be a workable solution.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Debt-for-carbon swaps may also be a viable means of financing plant retirement and can fully compensate debt or equity holders at a carbon price of less than $20\/tCO<sub>2<\/sub><\/span><span style=\"font-weight: 400;\">, whether or not a market for avoided carbon emissions exists by the time the plant does retire.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Since most of the coal plants&#8217; debt and equity liabilities have not been paid off and they operate in regulated markets where the instruments applied to date to accelerate coal retirement are either not present or too politically disruptive to stand a reasonable chance of implementation or success, these solutions are \u200b\u200bunlikely to arise domestically of their own accord. The authors argue early retirement of Chinese financed coal plants will likely require more active engagement by Chinese lenders and equity holders in renegotiating outstanding debts, lowering the cost of borrowing where appropriate and subsidizing interest payments where possible or agreeing to the transfer of debt and equity ownership to other institutions.<\/span><\/p>\n<p><em>* The journal article was originally published as a <a href=\"https:\/\/www.bu.edu\/gdp\/files\/2023\/03\/GCI_WP_030_CLARK_FIN.pdf\" target=\"_blank\" rel=\"noopener\">GDP Center working paper<\/a> in July 2023.<\/em><\/p>\n<a href=\"https:\/\/www.sciencedirect.com\/science\/article\/abs\/pii\/S0306261926009931\" class=\"button\">Read the Journal Article<\/a>\n<a href=\"http:\/\/www.bu.edu\/gdp-cn\/2023\/07\/21\/%e7%85%a4%e7%82%ad%e8%b5%84%e6%9c%ac%e5%88%a9%e7%94%a8%ef%bc%9a%e6%8f%90%e5%89%8d%e9%80%80%e5%bd%b9%e4%b8%ad%e5%9b%bd%e8%b5%84%e5%8a%a9%e7%87%83%e7%85%a4%e7%94%b5%e5%8e%82\/\" class=\"button\">\u9605\u8bfb\u4e2d\u6587\u7248\u5de5\u4f5c\u8bba\u6587<\/a>\n<a href=\"https:\/\/www.bu.edu\/gdp\/2023\/07\/21\/for-chinas-overseas-coal-plants-early-retirement-is-an-economic-and-political-imperative-heres-how-it-can-be-done\/\" class=\"button\">Read the Blog<\/a>\n","protected":false},"excerpt":{"rendered":"<p>China is not alone in directing public financing to new coal-fired power across the globe. Yet, China\u2019s development finance institutions have played a significant role in commissioning and financing over 39GW of currently operating overseas coal power plants, largely in South and Southeast Asia within the past two decades.\u00a0\u00a0 If these plants are assumed to [&hellip;]<\/p>\n","protected":false},"author":19928,"featured_media":23758,"comment_status":"closed","ping_status":"open","sticky":true,"template":"","format":"standard","meta":[],"categories":[1149,1070,156,72,105],"tags":[3318,3446,3447,3444,1765,1761,394,2314,3449,1769,454,1567,1451,1001,3622,2278,3448,409,641,3445,2081,513,1423,2082,455,3725,3450,3724,1443,2588],"_links":{"self":[{"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/posts\/23701"}],"collection":[{"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/users\/19928"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/comments?post=23701"}],"version-history":[{"count":15,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/posts\/23701\/revisions"}],"predecessor-version":[{"id":33646,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/posts\/23701\/revisions\/33646"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/media\/23758"}],"wp:attachment":[{"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/media?parent=23701"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/categories?post=23701"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bu.edu\/gdp\/wp-json\/wp\/v2\/tags?post=23701"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}