As the world's biggest polluter, what China decides to do with its energy policy matters to the whole planet. And while progress on the domestic front has rightly won Beijing praise from climate scientists, China is the world's largest funder of coal plants overseas. Is the country employing double standards?

After decades of unfettered growth, mostly based on manufacturing and other energy intensive industries, China is now showing an increased awareness of its environmental responsibility. In just a few years it's become a leader in solar technologies and electric cars manufacturing. It's also working hard to boost the share of renewables in its coal-heavy energy mix.

Under the Paris Agreement, China promised to peak its emissions by 2030 or earlier. To achieve that goal, coal consumption also has to peak. However, as of 2016, coal still made up 58% of China's energy output, more than all the other countries combined. New analysis from Greenpeace observes that coal demand is on the rise again, and so are projections for this year's overall emissions. Moving away from coal is not going to be easy.

A coal policy that works for all citizens requires check and balances

Because China is so big, and the living standards of its citizens vary wildly, the government can't plan a drastic coal phase-out the way smaller, less populous countries might do. The country has lots of coal resources and millions of Chinese depend on coal mining for jobs and energy. While Beijing and Shanghai are now at the forefront of clean energy innovation, a great number of remote communities still rely on dirty technologies.

Implementing regulations at the local level is thus a main challenge. One example is the country-wide emission trading scheme rolled out earlier this year, which covers the power sector with a view of eventually encompassing other energy-intensive sectors such as steel and cement. Old power plants run on outdated technologies that make them particularly polluting, and operators may have to pay a high price within an emission trading scheme to cover these carbon emissions.

But while such a strategy may seem good for the environment, it would exacerbate inequality within the country. "If you applied [new coal regulations] uniformly, it would end up sending revenues from older coal plants to newer cleaner gas plants in wealthy regions such as Guangdong" at the expense of poorer areas, says David Reiner, a senior lecturer in Technology Policy at the University of Cambridge in the UK. "You don't want a situation where you are simply sending money from poor regions to wealthier regions," he says, "but by the same token you don't want to be rewarding the dirtiest plants either".

China’s overseas investments unveil crucial gap in Paris Agreement

Despite reducing its building of pipelines domestically, China doesn't seem ready to give up coal altogether. The energy investments lost at home find new life along the Belt and Road Initiative, which aims to connect over 70 nations across four continents. According to a report by Greenpeace, the Sierra Club and Coalswarm, Chinese financial institutions are the world's largest funder of coal plants overseas, with US$15 billion spent in coal projects between 2013 and 2016.

The problem with offloading coal capacity abroad is that it's more difficult to implement and monitor environmental standards. "I absolutely do not have confidence in the so called ‘environmental and social safeguards’ that China claims to be embracing when working overseas," says Bill Laurance, ecologist and distinguished research professor at James Cook University in Australia. The same problem emerges in the field of energy production, where big coal power plants built in places such as Kenya or Pakistan are not subject to the same supervision they would have in the most affluent Chinese regions.

China's aggressive offloading policy highlights a crucial gap in the Paris Agreement. The burden of compliance and the design of suitable climate policies rest solely on each sovereign nation, a framework that has worked to kick-start the process. But global undertakings such as the Belt and Road call for a different type of oversight. Poor countries remain vulnerable to coal incentives such as the loans Chinese banks offer for the construction of new plants – while they may struggle to access climate finance. While the Paris architecture still does not capture such trends, international diplomacy will eventually have to reckon with the problem. As the UN member states prepare to finalise the rulebook for the implementation of the Paris Agreement this autumn in Poland, one of the big questions will be over the compatibility of foreign investments with the global climate deal. Climate change crosses borders, and wherever coal is burnt its impact will reverberate across the globe all the same.