Xi Jinping, General Secretary of the Chinese Communist Party (CCP), has announced that China will cease financing new coal-fired power stations in overseas territories. In an announcement on Tuesday at the United Nations General Assembly’s opening meeting, Xi reiterated the country’s commitment to carbon neutrality by 2060.

“China will step up support for other developing countries in developing green and low-carbon energy and will not build new coal-fired power projects abroad,” he said.

China had been previously funding large coal projects in countries including Indonesia, Vietnam, and Laos under the vast Belt and Road initiative. However, it had been under sustained pressure from the international community to reduce its own and foreign allies’ reliance on coal.

Between 2014 and 2020, around $160bn worth of Chinese –backed, coal-fired stations were being planned or announced outside China. However, more than $65bn worth of these proposed stations has been shelved or cancelled since 2014, with more projects seeking construction delays.

This announcement follows a trend of reduced Chinese commitment in the construction of coal-fired plants. The CCP announced no new Chinese-backed coal-fired power plant in 2020; by contrast, new coal-fired projects in 2020 were announced with backing from India’s Adani group in India, Korea, and Thailand.

The price of electricity from new coal-fired stations is a key driver of this. Recent biddings have shown that the price of electricity from new coal-fired power stations is about 500% more than from new solar power plants. It makes it more financially prudent for China to pivot towards photovoltaics and hydroelectric plants rather than developing new coal-fired stations.

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By GlobalData

“This is a major step forward,” Manish Bapna, president of the Natural Resources Defense Council, said in a statement. “This opens the door to bolder climate ambition from China and other key countries, at home and abroad.”

Despite the announcement, Xi did not give a firm timetable for ending overseas coal financing and did not address China’s plans to keep building coal-fired plants within their borders. China still relies on coal power for more than half of its energy needs, with coal-fired heavy industry making up around 37% of its economic activity last year.

It seems unlikely that China will significantly reduce its own coal production over this decade. However, in ending investment in foreign coal-fired stations, the country has taken an essential first step in weaning off its reliance on coal.