Economic Statecraft Competition of Coal Financing in Northeast Asia

• In Event: The New Era of Economic Statecraft in Asia and Latin America

Abstract

The Paris Agreement on climate change has provoked much debate in the field of international and environmental politics about how effective it delivers a solution to climate change. This paper adds to this debate by raising a slightly different question: what if the Paris Agreement actually produces a negative effect on climate change? The answer to this counterintuitive result, this paper argues, is economic statecraft competition. To examine this, this paper investigates China, Japan, and South Korea—three countries endorsing the Paris Agreement and operating some of the world’s largest export credit agencies— and their contribution to the developing Asia’s coal power plants. This paper explains why these three countries increased overseas coal financing activities and how their decisions are affected by the Paris Agreement and a parallel agreement initiated by the United States, which many see as a pretext to the Paris Agreement negotiations. It makes two claims. First, the competition among China, Japan, and South Korea in overseas coal financing began prior to the Paris Agreement for both geopolitical and economic reasons. Yet, since the Paris Agreement, these three countries all have strived to achieve their Paris commitments at home but at the same time have compensated the loss of their affected businesses by helping them expand overseas, which intensified their coal-financing competition abroad. Second, this competition is also catalyzed by the unleveled playing field created by the Paris Agreement and its parallel agreement in eliminating export credit agencies’ coal power projects. As the latter agreement (also known as the ‘clean coal deal’) is only signed into force among the members of the Organization of Economic and Cooperation Development (OECD), it sparks a rush on the part of Japan and South Korea to finance to-be-banned coal power plants overseas in order to prevent China’s domination in this area. The competition in turn causes the sudden growth of coal power projects in the developing Asia, contrary to the Paris Agreement’s intended objectives.

Author

• Jessica Liao, North Carolina State University