August 12, 2019
The Chinese export we should be targeting: Climate change
The Trump Administration’s trade war with China has aimed to reduce the trade deficit, but the volleys of tariffs between the US and China have impacted industries from railways to energy, and even required an aid package to keep the agriculture industry afloat. However, US trade policy should instead focus on a more menacing and enduring Chinese export, one that it does not send to the United States but whose emissions could end any hope of achieving global climate goals: coal.
Developing regions, led by Africa and Southeast Asia, already account for more than half of global energy demand, and that share is projected to reach 70 percent by 2040. The choice of energy sources tapped to fuel that increase in energy demand will determine whether or not the world meets its climate commitments. Coal, the dirtiest fossil fuel, is the most detrimental for climate change, and yet the developing world continues to build new coal plants. The traditional dilemma for developing countries in meeting rising energy demand is choosing between cheap fossil fuels, especially coal, and expensive renewables. Add to that dilemma the potential energy security benefits of relying on domestic coal (for those countries that have it) instead of imported renewables, which are also intermittent and thus less reliable, and some developing nations’ fossil fuel investments make sense—including India’s huge coal consumption, even as the country’s solar industry has grown prodigiously.
But that supposed dilemma may be easing as the prices of renewable technologies have fallen drastically over the last decade. Onshore wind and solar photovoltaic (PV) systems are often cheaper than fossil fuel alternatives, and a recent energy auction in Brazil saw solar achieve the cheapest power price of any source ever, demonstrating the promise of renewables in developing markets. Even in India, which produces coal domestically, the cost of solar has fallen below the average cost of coal. As senior United Nations (UN) energy official Rachel Kyte said, “Dressing up coal as a salvation for poor people is offensive to poor people. There are cheaper ways to get power to people who do not have power.” So, why would developing countries still choose coal over potentially cheaper and cleaner renewable alternatives?
The answer, in many cases, is China.
China has cast itself as a leader in combatting climate change on the global stage, particularly since the United States left the Paris Climate Accords, even as it is in the process of building or planning to build at least 300 coal plants around the world, from the Philippines to Egypt. It has been instrumental in making renewable energy economical by building cheap solar panels and exporting across the world, and it has made extraordinary progress in cleaning its domestic emissions—largely through closing coal plants. But that domestic progress comes at a cost: namely, 2.3 million coal miners’ jobs are projected to be cut by 2020. Creating demand abroad allows the central government to protect those jobs—both by stimulating coal demand abroad and exporting its labor—while claiming environmental stewardship at home. And despite ambitious domestic goals for coal use reduction, China’s new coal mine approvals have risen 500 percent so far in 2019. China’s coal export push has been particularly pronounced in some of the fastest growing energy demand centers: East Africa and in its own backyard, in Pakistan.
Take Kenya, for example, which recently contracted with a Chinese company to construct a coal plant in Lamu, in the northeast of the country. More than 70 percent of the country’s electricity generation comes from renewable sources, and it has the largest geothermal resources on the continent—a renewable that does not suffer from intermittency. Last year, President Uhuru Kenyatta announced plans for the country to reach 100 percent clean energy by 2020. Research suggests that tapping into the prodigious geothermal resources would be the best play for Kenya to electrify, and cheaper than coal—the country also has no experience in coal power or mining. Coal is currently better for powering certain industrial plants, but the country primarily wants to electrify, not enhance heavy industry. In other words, there are no apparent economic or security incentives to choosing coal over geothermal—certainly none that outweigh those incentives for geothermal. The plant will also be in an environmentally fragile region that is economically reliant on its fishing industry; the strain of increased population and coal pollution—both air and water—could drive thousands into poverty.
Pressure from China is the driving force behind Kenyan coal development. Because Kenya has no legacy coal industry, China does not just sell coal, it plans to build and operate the plant by sending Chinese coal workers abroad. And Kenya has good reason to try to appease the Asian powerhouse: its debt to China has swelled to almost $10 billion and prompted speculation that China might seize Mombasa, Kenya’s most important port, if the African nation does not pay up. After severe public backlash, a Kenyan court has temporarily halted the coal plant’s construction pending a more thorough environmental assessment—but China’s push for the project continues.
China’s most ambitious effort to date is in Pakistan, where it began constructing coal plants after Pakistan’s blackouts in 2014-15. Before the projects began, Pakistan generated less than 1 percent of its power from coal. China has brought Pakistan’s coal capacity from 190 megawatts (MW) to 15,300—threatening to quadruple the country’s emissions by 2030. China is leveraging its Belt and Road Initiative (BRI) to push coal in developing countries, despite coal’s unpopularity in those countries—less than a third of the population supports coal investment—especially compared to renewables, which are supported by more than 85 percent. China does invest in renewables as part of BRI, but that investment pales in comparison to coal—between 2014 and 2019, China built 12.6 gigawatts (GW) of renewable capacity internationally compared to 67.9 GW of coal.
China’s coal export diplomacy can be the deciding factor in developing countries’ fuel choice, but the United States is not innocent either—General Electric owns a minority stake in the Lamu coal plant. The Trump administration’s friendliness towards the coal industry prevents it from wholeheartedly targeting Chinese coal exports; after all, the administration would likely love if US companies followed China’s lead. The United Kingdom (UK) is similarly guilty—the country invested more than £2 billion in fossil fuel projects abroad last year, albeit largely in oil, as renewable investment fell to only £700,000.
It is no longer a rule that developing countries need coal power. In fact, more often than not, renewables are increasingly competitive—and the populations of developing countries want renewable energy, not coal. One solution to China’s climate bait-and-switch would be to account for exported emissions in assessing climate goals, which would prevent the country from claiming environmental stewardship while merely moving its emissions outside its borders. But the more pressing solution is to target those coal exports directly by supporting clean energy projects in the developing world. Last year, the World Bank announced a partnership with the UK and Canada to support renewable investment abroad—but the bank still funds coal projects as well (albeit only under very particular circumstances), unlike the European Bank for Reconstruction and Development, which has stopped all funding to coal projects in the developing world. But more can be done, particularly by the United States.
This is an opportunity for Organisation for Economic Co-operation and Development (OECD) countries to lead the energy transition and the fight against climate change abroad. By investing in renewable energy projects in developing countries, they can again take the lead on climate change mitigation. And if that is not enough of an incentive, opening those markets to renewable energy is more attractive than having them become dependent on Chinese coal imports—both economically and geopolitically. This is the trade war that really matters.
David Yellen is a program assistant at the Atlantic Council Global Energy Center. You can follow him on Twitter @david_yellen