Development Finance and China’s Global Coal Footprint

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

Abstract

This paper examines the political economy of Chinese overseas development finance for coal fired power plants. In just over a decade China’s two major policy banks provide more financing for overseas coal-fired power plant expansion than any other public financier in the world economy. We show how China’s overseas surge in public financing for coal fired power plants is a function of a number of domestic push and foreign pull factors. Excess capacity, environmental regulation, and structural change are push factors that converge with rising demand for energy, pockets of coal abundance, and the lack of financing in Western capital markets for coal fired power plants. Drawing on product cycle theory and the Environmental Kuznets Curve literature, we advance a theory of “globalization as domestic adjustment” that helps explain why Chinese development institutions focus on overseas coal finance. Given the social costs of coal in the world economy, national commitments to curb emissions may fall prey to negative international spillovers.

Authors

• Kevin P. Gallagher, Boston University

• Bo Kong, University of Oklahoma