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EconomyGlobal Economy

China slow to curb coal financing as Japan, South Korea ‘accept new reality’ on phasing out fossil fuels

  • Japan and South Korea recently made moves to limit financial backing for overseas coal projects, joining a trend of banks and multilateral lenders ditching the fossil fuel
  • As the largest global financier of coal energy, China is increasingly looking like the lender of last resort

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China remains the primary global backer of coal power, and the nation’s overseas coal financing remains extremely demand-driven in the face of environmental concerns. Photo: AFP
Harry Pearl

China risks being left behind as South Korea and Japan signal a shift away from financing overseas coal power in response to growing criticism over their support for the dirty fossil fuel.

The three countries are the top global lenders for coal energy infrastructure, bankrolling projects beyond their borders through export credit agencies and developing new markets to export coal plant technology.

But there are signs that Japan and South Korea may be preparing to scale back official support amid mounting pressure from the public and investors on environmental grounds.

Japan announced last month that it would tighten funding criteria for foreign coal-fired power plants, and next month South Korean lawmakers will debate several bills aimed at banning overseas coal investment as part of a post-coronavirus “Green New Deal”.

“This is profoundly serious, because it is an acceleration of a trend that is already established in global financial markets,” said Melissa Brown, the director of energy finance studies, Asia, at the Institute for Energy Economics and Financial Analysis.

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