Q&A

with Xinyue Ma and Kevin Gallagher

BU today: How important is Xi’s unique pledge to halt investment in overseas coal-fired power plants, especially given China’s nation-building?

Xinyue Ma: China is the largest international public funder of coal-fired power plants, contributing around 50 percent of global international public finance commitments between 2013 and 2018. The Group of 7 and South Korea have recently committed to end to any new funding for overseas coal projects, China’s pledge to stop building new overseas coal-fired power projects means that all major public financiers have now pledged to pull out international financing of coal-fired electricity. This is an important milestone and a watershed moment for China, as the largest developing country and country with the highest annual CO2 emissions, to have made firm climate commitments, both nationally and abroad.

Many details of the action plan have yet to be ironed out from this single line of Xi’s speech. However, this commitment means that national efforts to mitigate emissions will not be achieved by diverting fossil fuels abroad. This development sends a clear signal that China’s energy sector will need to undergo a profound transition from its current coal-dominated structure to a low-carbon power system.

BU today: Same question about Biden: How serious is his pledge of help, especially if it requires congressional approval?

Kevin Gallagher: The emerging markets of the world are estimated to have potential for climate-smart investment of at least $ 1.6 trillion per year. In 2009, developed countries pledged to achieve a collective mobilization goal of $ 100 billion per year by 2020 for climate action in developing countries, which has been extended until 2025. 2019, they still needed $ 20 billion to reach the goal.

Since 2012, the The United States provided an average of about $ 2.1 billion per year to climate-related development finance. Biden’s pledge could be a big push to help developed countries meet their climate finance commitments to the world. However, details of the program are said to be still pending and would require congressional approval.

BU today: What more should the two nations do to mitigate climate change?

Mom : In addition to international funding, China and the United States also face the immense task of domestic decarbonization. Last year at the UN, China is committed peak domestic CO2 emissions before 2030 and carbon neutrality by 2060. In April 2021, President Biden also announced a new 50-52% target reduction in greenhouse gas pollution in the United States from 2005 levels by 2030.

High-level political commitments can put us on the right track, but they do not bring change overnight. Both countries will need better defined national and international decarbonization guidelines to ensure accountability and fair transitions. The US commitment still has a long way to go, requiring a concrete plan that could overcome the partisan deadlock on the national climate bill.

Moreover, as China and all major international public financiers move away from coal, the next frontier is to put the private sector on the right track for a low carbon transition. Many of the world’s leading institutional investors and banks have already made ambitious decarbonization commitments. Policies such as carbon pricing and data disclosure will be essential to facilitate their transitions and empower private sector actors.

Gallagher: As governments and investors move away from coal, it is also important that developing countries have alternative plans for renewable energy. According to research from the Global Development Policy Center, the first submission of countries for the Paris Agreement [on climate] alone creates a need for investment of $ 1 trillion in renewable energy. In addition to power generation projects, investments in grid connection, distributed energy resources and operation of the power system will be increasingly important, given the expected increase in variable renewable energies. The environmental and social risks of these projects must also be carefully assessed.

Meanwhile, stopping construction of new fossil-fueled power plants alone will not be enough to achieve the Paris Agreement. Currently, installed fossil fuels will have to be decommissioned and replaced with renewable alternatives. The energy sectors of China and developing countries will face the difficult challenges of a just transition. The decommissioning of coal-fired power plants can potentially be associated with debt relief in countries facing debt distress, or with refinancing and reinvestment programs in renewable energy projects. Governments and financial institutions will need to join forces to facilitate the transition while minimizing economic and social costs.

Last but not least, there are many opportunities for China and the United States to cooperate on climate actions, including research and development, multilateral political engagement, best practice exchanges, and international climate finance. If these two countries could put aside their differences and explore frameworks for substantial cooperation, they could provide a huge boost to global climate efforts.