China's Overseas Coal Pledge Holds, but Loopholes Keep Plants Coming
China has cancelled 67% of the overseas coal capacity it planned in 2021, but loopholes and captive plants are still driving coal growth in Southeast Asia.
Five years after Chinese President Xi Jinping told the U.N. General Assembly that Beijing would stop financing coal power plants abroad, China has largely made good on the promise — but the retreat is neither complete nor airtight.
A report released this week to coincide with the General Assembly and New York Climate Week found that China has cancelled 67% of the overseas coal capacity it had in the pipeline in 2021. That amounts to 61.5 gigawatts of scrapped projects and an estimated 6.4 billion tons of lifetime carbon dioxide emissions avoided, according to the Centre for Research on Energy and Clean Air and People of Asia for Climate Solutions.
The rollback is a rare bright spot in a global climate effort that remains badly off track, and it comes as Asia reels from deadly weather disasters in recent months. China, the world's largest annual carbon emitter, is also the dominant manufacturer of electric vehicles, solar panels and wind turbines, giving its overseas energy choices outsized influence across Asia and Africa.
Yet analysts warn that the pledge's design leaves room for workarounds. Because it does not bind private Chinese companies, firms continue to invest in coal overseas. Indonesia has emerged as the top destination, with 17.1 gigawatts of China-backed coal capacity planned, much of it "captive" plants built to power heavy industry such as nickel and aluminium smelting without connecting to the national grid. Vietnam and Pakistan trail far behind, each with less than 4 gigawatts in the works.
"Coal expansion hasn't stopped because of the nature of the pledge itself, which still allows private Chinese companies to invest overseas," said Syahdiva Moezbar, an industry analyst at CREA in Jakarta.
Xiaojun Wang, executive director of PACS, said that when commercial interests override China's green development commitments and global climate security, the gains from its clean-energy leadership are undercut.
The picture is further complicated by recent energy shocks. The war in Ukraine and the conflict with Iran pushed energy security to the top of the agenda, and the closure of the Strait of Hormuz hit Southeast Asia first and hardest. The Philippines, Thailand, Indonesia and Vietnam all increased coal use to weather the crisis.
Southeast Asia accounts for nearly a fifth of global energy demand growth through 2035, according to the International Energy Agency, which noted that the crisis is prompting governments to reassess policy and investment strategies while prioritising energy security. Regional capitals are simultaneously expanding rooftop solar, incentivising electric vehicles and exploring nuclear power.
Li Shuo, director of the Asia Society Policy Institute's China Climate Hub, said the region's growing appetite for reliable supply could trigger another round of coal fever and will keep testing the resolve behind the moratorium. He described the transition as a two-party tango, requiring equal commitment from China and its partners, and said that five years on, the saga is far from over.
Xi skipped this week's U.N. meeting in favour of a summit with U.S. President Donald Trump, sending Vice President Han Zheng to New York. Han is scheduled to address the General Assembly on Saturday.