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The blackouts that plagued Pakistan in 2014 and 2015 made clear what many citizens already knew too well: the country needed an energy revolution, and fast. In the short time since, Pakistan has gone from having only one coal-fired power plant to nine, with four more under construction. At the same time, Pakistan has been building some of the world’s largest mines to dig out the country’s substantial — but relatively poor quality — coal reserves.
Pakistan’s turn to coal was hardly surprising. Before 2015, energy inefficiencies were costing the country some $18 billion (6.5% of GDP) annually, drawing the ire of citizens and businesses alike. And with China providing tens of billions of dollars in financing along with equipment and technical capacity, the coal solution appeared ready-made. But this seemingly low-hanging energy fruit has a dirty underbelly, and it’s hardly limited to Pakistan — or to Chinese investment.
Investment from China, Japan, and South Korea threatens to lock in decades of pollution in developing Asian countries with pronounced public health, socioeconomic, and climate change implications. In Pakistan, clouds of smog already blanket Karachi, Lahore, and beyond. They primarily come from transportation, burning trash, and poorly managed industrial activity, and have devastating health and environmental impacts. With the influx of coal, these clouds are set to thicken.
China, Japan, and South Korea have enormous influence over the future of public health, energy markets, and global climate change — and not just through the actions they take at home. Despite fits and starts, these three major economies are gradually cleaning their domestic environments and lowering their fossil fuel dependence. They are also funding coal production abroad at world-leading levels.
From 2016 to 2018, Japanese banks provided 30% of the total lending received by the world’s top coal plant developers, with the two largest lenders — Mizuho Financial and Mitsubishi UFJ Financial — providing $12.8 billion and $9.9 billion, respectively. Japan is also a giant in institutional investments, with its Government Pension Investment Fund providing some $7.3 billion in 41 coal plant developers — the second largest such holdings in the world.
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While Chinese banks provide “only” 12% of direct lending to coal developers, they dominate the underwriting — a process of raising investment capital. Chinese banks provide nearly three-quarters of the total underwriting in international coal development, and Chinese coal plant enterprises — which include 11 of the world’s 20 largest — are involved across the gamut of project contracting, equipment and expertise exports, equity, and construction.
Like Japan, South Korea’s National Pension Service is a top-five institutional investor in coal at $4.5 billion, and Korean companies like KEPCO, Posco Energy, and Daewoo Engineering & Construction are developing coal plants across Indonesia, Vietnam, the Philippines, Bangladesh, and Mongolia.
All told, roughly 80% of the new coal plants worldwide slated for foreign investment are at least partially supported by funding or firms from China, Japan, and South Korea. These coal plants help meet urgent electricity needs, but they accelerate healthcare demands and have rippling direct and indirect social costs. They also challenge the Paris Agreement goal of keeping global temperature increases well below two degrees Celsius above pre-industrial levels.
The Asian countries hosting coal expansion will doubtless face enormous future emissions. Pakistan’s nascent coal sector may contribute to a quadrupling of its greenhouse gas emissions between 2015 and 2030. Indonesia is on track to nearly double coal consumption between 2018 and 2027. These countries alone have a combined population of some 470 million people, and are among the most important in the world for curtailing emissions growth in the coming decades.
Coal is attractive to these and other developed economies because of its proven track record of driving development, its availability on global markets (and in some cases domestically), and the presence of financial and operational actors — such as the banks and companies from Northeast Asia — ready and willing to help build coal infrastructure.

The Sahiwal Coal Power plant in Punjab Province, Pakistan, began operating in 2017. It is funded by China as part of the China-Pakistan Economic Corridor.
Xinhua/Ahmad Kamal/Alamy
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A fuller valuation of coal, however, reveals a greater expense for the public purse than its price per kilowatt hour. Burning coal carries enormous human costs resulting from breathing the small particulates it spews. In just one example, India sees as many as 115,000 premature deaths each year from coal burning, along with millions of cases of respiratory problems and as much as $4.6 billion in annual hospital costs.
Coal investment flowing from Northeast Asian powers partly reflects a dubious consequence of their domestic success. China has reversed trends that saw domestic coal consumption triple from 2000 to 2013, leaving it with consumption roughly equal to the rest of the world combined. Responding to the resulting air pollution, heavy industry production gluts, and a desire to move toward services and higher tech manufacturing, coal is declining as a percentage of China’s energy mix and will soon decline in absolute terms. As China moves toward peaking emissions in 2030 — perhaps sooner — and increasing the non-fossil share its energy mix to 20% (with natural gas making up much of the balance), it is no longer the vibrant coal market it once was.
Japan’s efforts to wean itself from coal took a hit with the Fukushima nuclear disaster in 2011, which led to all nuclear power being removed, and then sparingly reintroduced since. Prior to Fukushima, Japan operated 54 nuclear reactors to produce roughly one-third of its electricity — and planned to further expand the sector to make up for taking roughly half of its coal production offline. As a result of Fukushima, coal’s share of electricity generation in Japan is higher now than it was before the disaster. Yet Japan is also committed to reducing coal consumption in the coming decades, implementing energy conservation policies to drive overall demand down, and using financial incentives to rapidly grow its small renewables sector (solar grew five-fold between 2012 and 2015). Japan’s pipeline of new coal-fired power plants has collapsed from almost 12.7 gigawatts of projects in January 2015, to less than 4.6 gigawatts with more cancellations likely to come. In advance of the June 2019 G20 meetings in Osaka, Japan’s cabinet approved plans for overall carbon neutrality by 2050, which would include widespread coal station closures beginning in the mid-2020s.
South Korea moved from being one of Asia’s poorest countries in the 1950s to the world’s 11th-largest economy by 2016, largely on the back of heavy industry growth. This energy-intensive pathway began to shift in the mid-2000s as environmental stress led to a series of green growth policies. Coal consumption flattened in the early 2010s, and — some small spikes notwithstanding — is set to decline moving forward. The government’s current electricity strategy suspended plans for new coal-fired capacity not already under construction and is retiring all plants older than 30 years.
As their power mixes shift at home, coal industry interests in China, Japan, and South Korea look abroad for continuing returns. Reversing this trend requires solutions that combine the carrots of new avenues for profitability in non-coal sectors, and the sticks of stricter environmental regulation — both in investor and recipient countries.
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For recipient countries this means recognizing more completely the costs of coal in their energy planning. Accounting for coal’s socioeconomic and environmental costs, through taxes on pollution, caps on emissions, rolling back fossil fuel subsidies and the like, makes cleaner energy more financially and strategically attractive. The natural endowments, political and economic structures, and technical capacities of countries will inform widely disparate energy portfolios that work for them. The imperative for these countries is to attract outside investments and partnerships that service such portfolios — from power generation to grid development, transmission and use — rather than finding sanctuary in coal.
Similarly, the Northeast Asian powers need to reevaluate their long-term strategic interests in the energy sector. Investing in coal abroad can ease domestic transitions away from the energy source, and assuage the resistance brought by domestic coal actors. But it delays an inevitable sunsetting of the industry, and creates too many problems along the way to be justified.
Redoubled civil society, diplomatic, and media attention to the prominence of Northeast Asian coal funding is raising the reputational stakes for these countries. While international legal barriers on the issue are unlikely, norms around coal divestment are growing. The flight of major financiers, fears of stranded assets, G20 dialogue on rolling back coal through “responsible investment,” the growth of environmental and carbon markets, and trade considerations on border carbon adjustments could all create headwinds and headaches for coal investment moving forward.
More plainly, coal investments are increasingly risky and in tension with Chinese, Japanese, and South Korean goals of improving trade partnerships. If the first-order impetus for investing in the energy systems of their developing neighbors is to make money and fill a need, the more overarching purpose is to help build vibrant markets and growing consumer classes in developing Asia that can fuel future regional growth — from which the Northeast Asian powers would benefit mightily. Coal has too much environmental and public health baggage to meet these objectives in the long-term, and presents a steep opportunity cost. China, Japan, and South Korea have the opportunity to lead an Asian clean energy renaissance that solidifies their primacy in the energy and efficiency sectors of the future. Taking advantage of this opportunity would be a win for them, a win for developing Asia, and a win for the global climate.