Fueled by China, Coal Still Firing in SE Asia Despite Environmental Concerns —

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Coal is falling out of favor across the developed world because of concerns over pollution and climate change, but it remains a growing energy choice in many parts of Southeast Asia driven by Chinese investment.

While many markets, including the United States, Europe, and East Asia, shift away from coal, Chinese banks, energy and construction companies remain committed to financing and building dozens of plants in Indonesia, Vietnam, Cambodia, and Laos.

That’s despite growing concerns about environmental degradation, electricity oversupply, and air pollution. Coal is widely considered the dirtiest fossil fuel for electricity generation, with the highest greenhouse gas emissions, and widespread air, water, and soil quality issues due to mining, burning, and coal waste. 

“It’s definitely true that China is the main investor for coal in Southeast Asia,” said Isabella Suarez, a Philippines-based analyst for the Center for Research on Energy and Clean Air (CREA). “If you look at overseas investment portfolio for Chinese coal, Indonesia and Vietnam are second- and third-highest in the world.”

Coal accounts for 56 percent of electricity generation in Indonesia, 34.3 percent in Vietnam and 29.3 percent in Cambodia.

Hanoi smog.jpg
A thick blanket of smog covers the Hanoi skyline, Sept. 27, 2019. The city – along with Jakarta – is regularly ranked as one of the most polluted in the world. Credit: AFP

China dominates overseas coal

Increasingly, China is the only country actively pursuing coal investments. Chinese financial institutions including China Construction Bank, Bank of China, ICBC, and the Agricultural Bank of China, are ranked as the top 11 financiers of coal-fired power and the top 10 financiers of coal mining. That’s according to Banking on Climate Chaos, a report released in late March by a coalition of international NGOs including Rainforest Action Network, Sierra Club, and Oil Change International.

The report found that in total, Chinese banks account for US$244.7 billion in total coal-related financing since 2016, more than the largest American, European, Japanese, Korean and Canadian banks combined.

Chinese-funded projects in Southeast Asia include the 625 megawatt (MW) Unit-8 of the Banten Suralaya power station and the 1200 MW Bangko Tengah SumSel 8 plants in Indonesia; the 1980 MW Vĩnh Tân-3 plant in Vietnam; the 700 MW Botum Sakor power station in Cambodia; and the 668 MW Dinginin power station in the Philippines.

Local communities actively oppose many of these projects because of environmental and social impacts. The Sumsel 8 plant is especially concerning as it is a mine-mouth facility, in which the coal-fired power plant is built near the coal mine.

“When the plant is in operation, then the community nearby will face double impacts,” said Pius Ginting, the Jakarta, Indonesia-based executive director of Aksi Ecologi Dan Energi Rakyat (AEER), a domestic NGO advocating against Chinese coal projects. “One from the air/water pollution from the power plant, and second is from the mining itself, because the coal mine is in the same area.”

AEER, whose name translates as Ecological Action and People Energy, sent a letter in early 2021 expressing these concerns to the main financier, the Export-Import Bank of China, the lead company building the project, China Huadian Corporation, and the Chinese Embassy in Jakarta. AEER has yet to receive a response.

Besides the environmental impacts, Ginting fears that Chinese funding for coal makes it harder for Indonesia to invest in renewables.

“There could be an opportunity for renewable energy to thrive, but these are overcome by the presence of China’s investment in Sumsel 8 and other coal plants,” said Ginting.

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A tugboat pulls a coal barge along the Mahakam River in Samarinda, Indonesia, March 2, 2016. Credit: Reuters

Pollution and financial concerns

Another concern is air pollution. Southeast Asian cities including Jakarta and Hanoi…



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