For more than two decades, Zimbabwe has been trying to break ground on a giant coal-power complex by the world’s biggest man-made reservoir. China just agreed to get the $4,2 billion project underway.
The development near the southern shore of Lake Kariba is good news for Zimbabwe, where a collapsing economy and erratic policies have deterred foreign investment for the past 20 years.
But it flies in the face of a growing global consensus that has seen financial institutions from Japan to the US and Europe shun investments in coal projects. That retreat leaves the way open for Chinese companies – many with state backing – even at the risk of undermining the spirit of China’s international commitments to fight climate change.
“We are very pleased that the project is going ahead, especially as major banks in the world are forced to stop financing coal-fired power stations,” Caleb Dengu, chairman of RioZim Energy, the company that owns the project, said in a response to questions.“This is testimony of Chinese commitment to development projects in Africa. The Chinese are interested in joining hands.”
China is certainly in need of friends: A global backlash is building over Beijing’s handling of the coronavirus outbreak first identified in the Chinese city of Wuhan — evidence of a deficit of trust that was compounded by incidents of racism toward Africans in the southern city of Guangzhou last month.
Yet pumping money into coal just underlines China’s creeping isolation in backing plants that generate large quantities of greenhouse gases and other pollutants.
For financial institutions, “the ever-increasing reputational risk of funding a project like this, and the high likelihood that it would end up as a stranded asset, should make them very wary of getting involved,” said Tracey Davies, director of Cape Town-based shareholder activist organisation, Just Share.In fact, the Chinese government promised back in 2017 to green its Belt and Road Initiative overseas construction plan to promote environment-friendly development in line with United Nations goals. President Xi Jinping pledged last year that the programme must be green and sustainable.
Yet Chinese companies and banks are involved in financing at least 13 coal projects across the continent with another nine in the pipeline, according to data compiled by Greenpeace. Since 2000, the China Development Bank and the Export-Import Bank of China alone have supplied $51,8 billion of finance for coal projects globally, according to the Boston University Global Development Policy Centre.
“Despite promises to shift support to green and low-carbon energy, Chinese banks have continued to bankroll coal power projects,” said Lauri Myllyvirta, lead analyst for the Centre for Energy Research and Clean Air, an independent research body.
“China has enormous state-owned thermal-power manufacturing and engineering firms that rely on overseas deals to stay in business.”
President Xi regularly mentions China’s commitment to multilateralism through fighting climate change as a signatory of the Paris Agreement. China, however, is unlikely to divest from coal anytime soon. Despite hefty investment in renewable energy over the past decade, China still mines and burns about half the world’s coal.