The Cable

Even China-Backed Development Bank Won’t Touch Coal Projects

The World Bank rival says it will only fund environmentally-friendly projects.


The China-backed Asian Infrastructure Investment Bank won’t be getting into the coal business.

That’s according to AIIB’s vice president Thierry de Longuemar. Speaking in Beijing ahead of the bank’s second general assembly on the South Korean island of Jeju this week, de Longuemar said that the China-backed rival to the World Bank and other development banks would adhere to the kind of environmental rules guiding investments at those Western-dominated institutions.

“There are things it won’t finance, like coal-fired power plants,” he told AFP.

Bank officials had said earlier this year that they would avoid investments in coal, but then acknowledged that member states in the bank were still wrestling with the issue. But the AIIB’s apparent resolve to forgo coal power plants — if it is adhered to — would be yet another sign of headwinds for coal, a big contributor to greenhouse gas emissions that cause climate change.

Nearly every country in the world — except Syria, Nicaragua, and the United States — is in the Paris climate pact, which seeks to curb emissions in the developed and developing world alike. In many places, especially the United States, renewable energy like wind and solar power has become more competitive, undermining the economic case for coal-fired electricity. (And cheap natural gas in the United States only makes coal’s woes worse.)

The United States is not part of the AIIB, which has 77 member nations, and expects to have 85 by the end of 2017. Washington sought to keep allies from joining the initiative, fearing it would give Beijing undue leverage in the developing world, but partners like Britain and Germany quickly signed up regardless. China holds a 28 percent stake in it, followed by India with eight percent. It is chaired by a former Chinese vice minister of finance, Jin Liqun.

“You can’t deny that it’s a Chinese initiative,” de Longuemar told AFP.

So far, the Asian bank has funded a number of projects, from a natural gas infrastructure initiative in Bangladesh to a dam safety project in Indonesia. The bank approved $1.7 billion in loans in 2016, with plans to increase lending to $2.5 billion this year. But to date, none of the projects have been a part of China’s “One Belt One Road” initiative meant to connect Beijing with the West.

But just because the AIIB says it plans to steer clear of coal doesn’t mean that China is out of the business entirely. There are other pots of Chinese money underwriting big investments across southeast Asia and Central Asia, including the New Silk Road Fund and the New Development Bank (the so-called BRICS bank), and they don’t seem to have the same environmental standards as AIIB. In Pakistan alone, Beijing plans to invest tens of billions of dollars in energy projects, including coal-fired power plants.

Unlike those other funds, which are meant to help realize Chinese President Xi Jinping’s dream of connecting China to Europe across Central Asia, the AIIB is meant to be a truly multilateral institution, the bank official said.

It will not act as “an instrument” of the Chinese government, De Longuemar said.

“China has a higher interest in the success of this institution. But to say that it is a Chinese bank rather than an international bank would be… a big exaggeration,” he said.

Photo credit: ALEX WONG/Getty Images

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