China’s carbon dioxide (CO2) emissions are set to fall in 2024 and could be facing structural decline, due to record growth in the installation of new low-carbon energy sources.
The new analysis for Carbon Brief, based on official figures and commercial data, shows China’s CO2 emissions continuing to rebound from the nation’s “zero-Covid” period, rising by an estimated 4.7% year-on-year in the third quarter of 2023.
The strongest growth was in oil demand and other sectors that had been affected by pandemic policies, until the lifting of zero-Covid controls at the end of 2022.
Other key findings from the analysis include:
- China has been seeing a boom in manufacturing, which has offset a contraction in demand for carbon-intensive steel and cement due to the ongoing real-estate slump.
- The emissions rebound in 2023 has been accompanied by record installations of low-carbon electricity generating capacity, particularly wind and solar.
- Hydro generation is set to rebound from record lows due to drought in 2022-23.
- China’s economic recovery from Covid has been muted. To date, it has not repeated previous rounds of major infrastructure expansion after economic shocks.
- There has been a surge of investment in manufacturing capacity, particularly for low-carbon technologies, including solar, electric vehicles and batteries.
- This is creating an increasingly important interest group in China, which could affect the country’s approach to domestic and international climate politics.
- On the other hand, coal power capacity continues to expand, setting the scene for a showdown between the country’s traditional and newly emerging interest groups.
Taken together, these factors all but guarantee a decline in China’s CO2 emissions in 2024.
If coal interests fail to stall the expansion of China’s wind and solar capacity, then low-carbon energy growth would be sufficient to cover rising electricity demand beyond 2024. This would push fossil fuel use – and emissions – into an extended period of structural decline.
- Emissions are set to fall in 2024
- Why emissions grew in Q3 of 2023
- Coal expansion threatens China’s international commitments for 2025
- Solar, wind and hydropower set to surge in 2024
- Continued clean-power growth can peak emissions in 2024
- Why did clean energy investments surge during and after Covid?
- What comes next for China’s emissions peak and decline
- Data sources
Emissions are set to fall in 2024
China’s CO2 emissions have seen explosive growth over recent decades, pausing only for brief periods due to cyclical shocks.
Over the past 20 years, its annual emissions from fossil fuels and cement have climbed quickly almost every year – as shown in the figure below – interrupted only by the economic slowdown of 2015-16 and the impact of zero-Covid restrictions in 2022.
While CO2 is rebounding in 2023 from zero-Covid lows (see: Why emissions grew in Q3 of 2023), there have also been record additions of low-carbon capacity, setting up a surge in electricity generation next year. (See: Solar, wind and hydropower set to surge in 2024.)
Combined with a rebound in hydro output following a series of droughts, these record additions are all but guaranteed to push fossil-fuel electricity generation and CO2 emissions into decline in 2024, as shown in the figure below.
Year-on-year change in China’s annual CO2 emissions from fossil fuels and cement, million tonnes. Emissions are estimated from National Bureau of Statistics data on production of different fuels and cement, China Customs data on imports and exports and WIND Information data on changes in inventories, applying IPCC default emissions factors and annual emissions factors per tonne of cement production until 2019. Monthly values are scaled to annual data on fuel consumption in annual Statistical Communiques and National Bureau of Statistics annual Yearbooks. Chart by Carbon Brief.
Moreover, with the power sector being China’s second-largest emitter and with other major sectors, such as cement and steel, already seeing CO2 falling, this drop in power-sector emissions could drive a sustained, structural emissions decline for the country as a whole.
This is because – for the first time – the rate of low-carbon energy expansion is now sufficient to not only meet, but exceed the average annual increase in China’s demand for electricity overall. (See: Continued clean power growth can peak emissions in 2024.)
If this pace is maintained, or accelerated, it would mean that China’s electricity generation from fossil fuels would enter a period of structural decline – which would also be a first.
Moreover, this structural decline could come about despite the new wave of coal plant permitting and construction in the country. (See: Coal expansion threatens China’s international commitments for 2025.)
In addition, record additions of low-carbon energy deployment have been accompanied by rapid expansion in related manufacturing capacity. (See: Why did clean energy investments surge during and after Covid?)
This could create tension with traditional interests in the country’s coal industry, yet it also boosts the economic and political case for China to continue supporting low-carbon growth, both at home and abroad. (See: What comes next for China’s emissions peak and decline.)
Why emissions grew in Q3 of 2023
China’s CO2 emissions continued to rebound in the third quarter of 2023, increasing an estimated 4.7% year-on-year, but slowing to 1% in September.
This follows rapid growth in the first and second quarters of the year, after the same periods in 2022 had seen emissions decline by record amounts.
China’s quarterly CO2 emissions from energy use and cement production are shown in the figure below, with the third quarter of each year highlighted in red.
China’s quarterly CO2 emissions from fossil fuels and cement, million tonnes of CO2. Emissions are estimated from National Bureau of Statistics data on production of different fuels and cement, China Customs data on imports and exports and WIND Information data on changes in inventories, applying IPCC default emissions factors and annual emissions factors per tonne of cement production until 2019. Monthly values are scaled to annual data on fuel consumption in annual Statistical Communiques and National Bureau of Statistics annual Yearbooks. Chart by Carbon Brief.
The reasons for the emissions rebound this year are predictable. Most significantly and obviously, oil demand has risen from zero-Covid lows, following almost three years of pandemic controls.
Oil consumption is now approaching the pre-Covid trendline and does not yet show any sign of abating, increasing by an estimated 19% year-on-year in the third quarter. This is shown by the large light blue bar at the top of the figure below.
Electricity demand also rebounded from Covid lows in sectors that had been affected by pandemic controls, making power-sector coal use the second-largest driver of rising emissions in the third quarter of the year (the lowest grey bar).
The increase in power-sector demand happened almost entirely in July, before hydropower generation began to rebound from historic lows caused by low rains in 2022 and early 2023.
Annual change in quarterly CO2 emissions broken down by sector and fuel, millions of tonnes. Emissions are estimated from National Bureau of Statistics data on production of different fuels and cement, China Customs data on imports and exports and WIND Information data on changes in inventories, applying IPCC default emissions factors and annual emissions factors per tonne of cement production until 2019. Chart by Carbon Brief.
Coal use outside the power sector fell (grey chunks), due to a major drop in building materials driven by the ongoing contraction of real-estate construction and construction of associated infrastructure. This is also reflected in the drop for cement emissions (red).
Other uses of coal increased, particularly the use of coking coal (black chunks). The increase in coal use for steelmaking was larger than the increase in steel output, indicating a shift from electric arc to coal-based steel production.
Investment growth – for example, investment in electrical machinery manufacturing grew 38% year-on-year and investment in railways grew 22% – has supported demand for energy-intensive commodities, despite an ongoing contraction in real estate, generally the main user of metals.
Gas use continued to fall (dark blue), reflecting a drop in demand and a shift from gas to electricity and coal due to high prices.
Coal expansion threatens China’s international commitments for 2025
The pattern of economic growth in China, both during and after the Covid-19 pandemic, was highly energy- and carbon-intensive. This has put China off track against the CO2 and energy intensity targets – aimed at reducing CO2 and energy use per unit of GDP – that it promised in its updated climate pledge (nationally determined contribution, NDC) in 2021.
This would mark a departure from previous progress, with China having exceeded its energy and CO2 intensity targets during the 11th (2006-2010) and 12th (2011-2015) five-year plan periods, as shown in the figure below.
The slowdown in progress on energy intensity began already at the end of the 13th five-year plan period (2016-2020), resulting in that target being missed.
China’s progress on reducing energy and CO2 intensity of GDP compared to five-year plan targets, converted into required annual rates of progress. All previous targets since the 11th five-year plan (2006–11) have been met, but now progress has fallen short on both targets for three consecutive years. Source: Calculated from National Bureau of Statistics annual data on energy and GDP; 2022 calculated based on preliminary information released by the NBS. Figures for the latest five-year plan are shown as reported and as corrected for coal quality. Chart by Carbon Brief.
The coming surge of low-carbon energy would put the country on track for the CO2 intensity target, if similar levels are added next year.
The energy intensity target, in contrast, will not be met on current trends. Only a sharp shift to consumption-driven growth – which the government says it prefers, but has found the required measures hard to implement – could allow this target to be hit.
Permitting of new coal power plants continued, with at least another 25GW given the go-ahead in the third quarter, based on a compilation of permits reported by Polaris Network.
The resurgence of coal-plant construction contradicts a policy pledge that China’s president Xi Jinping personally announced. Xi pledged to “strictly control new coal-fired power generation projects” in China in 2021–25.
This pledge was made in the Leaders Summit on Climate in April 2021 and consequently added to China’s NDC, just months before the current wave in coal power plant permitting and construction began.
The State Council Development Research Center recently projected that China’s coal power capacity should peak at 1,370GW in 2030, up from 1,141GW at the end of June.
As 136GW was already under construction at the end of June, another 99GW had already been permitted, and a further 25GW has been permitted since, realising this projected peak would mean stopping new permits immediately.
Alternatively, retirements of existing capacity would have to be accelerated significantly, or some already permitted projects would have to be cancelled or shelved.
Solar, wind and hydropower set to surge in 2024
While emissions have climbed in 2023, it has also seen a historic expansion of low-carbon energy installations. The most striking growth has been in solar power, where expected installations in 2023 – some 210 gigawatts (GW) – are twice the total installed capacity of solar power in the US and four times what China added in 2020.
The newly installed solar, wind, hydro and nuclear capacity added in 2023 alone will generate an estimated 423 terawatt hours (TWh) per year, equal to the total electricity consumption of France.
About half of the solar panels added this year will be installed on rooftops, largely driven by China’s “whole county solar” model, where a single auction is carried out to cover a targeted share of the rooftops in a county with solar panels in one fell swoop.
Under this model, the developer negotiates with building owners and arranges contracts with the grid, financing, procurement, contracting and installations. This model – which could be described as centralised development of distributed solar – has enabled rooftop solar deployment at a vast scale.
The other half of solar installations are set to be in large utility-scale developments, particularly in the gigawatt-scale “clean energy bases” in western and northern China.
All in all, 210GW of solar, 70GW of wind, 7GW hydro and 3GW of nuclear are expected to be added in China this year. This is shown in the table below, along with expected electricity generation assuming newly added capacity performs in line with the existing fleet.
Expected capacity additions in 2023 and added annual generation
| Source | GW | Average utilisation | TWh |
|---|---|---|---|
| Solar | 210 | 13.6% | 251 |
| Wind | 65 | 23.0% | 130 |
| Nuclear | 3 | 83.4% | 21 |
| Hydro | 7 | 36.7% | 21 |
| Total | 284 | 17.0% | 423 |
In addition to the electricity generated by this newly added capacity, China is likely to see a large year-on-year increase in output from its massive hydropower fleet in 2024.
The utilisation of this fleet plumbed historical lows from August 2022 until July 2023, as a result of record droughts and heatwaves in summer 2022, followed by low rainfall into 2023.
The year-on-year drop in power generation was compounded as hydropower operators were conserving water in the spring and early summer of 2023, building up the water levels in their reservoirs for the peak demand season in August.
(This behaviour is clear in CREA analysis of hydropower generation data and water levels at 13 major hydropower reservoirs across China, reported by Wind Financial Terminal, showing water levels approaching historical highs while output remained low until July.)
This was in stark contrast with 2022, when spring and early summer had good rains and hydropower was generating at very high rates.
In addition to the electricity generated by this newly added capacity, China is likely to see a large year-on-year increase in output from its massive hydropower fleet in 2024.
The utilisation of this fleet plumbed historical lows from August 2022 until July 2023, as a result of record droughts and heatwaves in summer 2022, followed by low rainfall into 2023.
The year-on-year drop in power generation was compounded as hydropower operators were conserving water in the spring and early summer of 2023, building up the water levels in their reservoirs for the peak demand season in August.
(This behaviour is clear in CREA analysis of hydropower generation data and water levels at 13 major hydropower reservoirs across China, reported by Wind Financial Terminal, showing water levels approaching historical highs while output remained low until July.)
This was in stark contrast with 2022, when spring and early summer had good rains and hydropower was generating at very high rates.
In China’s rigidly regulated power system, hydropower operators do not have an economic incentive to time their output to the peak demand season. However, after the electricity shortages of summer 2022, administrative intervention appears to have replaced economic incentives and compelled generators to ensure high reservoir levels.
Now water levels in reservoirs have climbed up to or above their seasonal averages, based on data from Wind Financial Terminal. Long-term weather forecasts point to above-average rains lasting until February, the end of the forecast period, consistent with predictions for the current El Nino.
If these forecasts hold out, hydropower utilisation will not only recover but come in above historical averages in 2024. Meanwhile, another 29GW of hydropower has been added from the beginning of 2022 to September 2023, marking a 7% increase in capacity.
The hydropower generation rebound had already begun in August-September and will continue through this year. However, electricity demand growth at the end of last year was very weak due to strict Covid lockdowns, so emissions are unlikely to fall year-on-year.
Total CO2 emissions fell 4% from the last quarter of 2020 to the last quarter of 2022, setting up a very low base of comparison for the last quarter of this year.
Continued clean-power growth can peak emissions in 2024
Given the low-carbon electricity capacity already installed this year – and the outlook for hydropower generation – a drop in power-sector emissions in 2024 is essentially locked in, barring a major acceleration in electricity demand growth.
From 2025 onwards, the development of power-sector emissions depends on whether low-carbon energy additions are maintained or accelerated.
Looking at the added annual generation from low-carbon energy installations in 2023, the total comes out to more than the average annual increase in China’s power demand, for the first time, marking a potential inflection point.
At this point, the growth of low-carbon electricity (columns in the chart below) would outweigh the overall growth of electricity demand (dots). As a result, the amount of electricity generated using fossil fuels – and the associated emissions – would decline.
Columns: Annual increase in expected electricity generation from new low-carbon installations, terawatt hours, broken down by source. Dots: Annual increase in electricity demand overall. Dashed line: Average increase in demand during 2010-2023. Figures for 2023 are forecast. Data sources: China Electricity Council (CEC) and Ember, with 2023 capacity additions from CEC and Bloomberg. Chart by Carbon Brief.
As long as low-carbon energy installations are maintained at the projected 2023 level, the growth in low-carbon power generation would enable China to peak and decline coal use in the power sector imminently, with 2023 remaining the peak year.
How will power-sector emissions develop if the 2023 level of low-carbon energy additions is maintained?
A simple projection – assuming that electricity demand follows its historical trend of rising 5% per year and hydropower utilisation returns to historical averages – points to a significant drop in fossil fuel-based (thermal) power generation in the spring and summer of 2024, shown by the bottom left segment in the chart below, and zero growth thereafter.
If China’s current and expected economic slowdown results in slower electricity demand growth – or non-fossil energy additions accelerate further – power generation from fossil fuels will continue to fall, rather than stabilise.
Under these assumptions, hydropower generation would see steep increases already in October 2023 – January 2024, but power generation from fossil fuels still climbs year-on-year, due to the low base set under the zero-Covid policy.
A return to average demand growth rates after the post-Covid rebound, (top left), continued strong growth in solar (centre right) and wind (centre left) output, combined with rebounding hydropower output (bottom right), would push fossil-fuel power generation down from February 2024 onwards (bottom left). This would mean fossil fuel-fired electricity generation falling 3% in 2024 and remaining at similarly reduced levels in 2025.
Past and projected future year-on-year changes in monthly electricity generation, %. Top left to bottom right: Overall electricity demand; nuclear; wind; solar; thermal (coal and gas); and hydro generation. Data sources: China Electricity Council (CEC) and Ember, with 2023 capacity additions from CEC and Bloomberg. Chart by Carbon Brief.
Moreover, rapid electrification has meant that almost all of the recent growth in China’s CO2 emissions has taken place in the power sector.
Therefore, when power-sector emissions peak, total emissions are likely to follow, as falling coal use outside the power sector balances out increases in oil and possibly gas demand, which are also mitigated by electrification.
Why did clean energy investments surge during and after Covid?
China’s output of solar cells is set to exceed 600GW this year, up from 375GW last year and enough to produce 500GW of solar panels. For comparison, only 240GW of panels were installed globally last year.
The output of batteries in China will reach 800 gigawatt hours (GWh), up from 550GWh last year and enough to power 20m electric vehicles (EVs).
Electric vehicle output exceeded 8m units over the 12 months to September, representing more than 30% of all vehicles produced in China. The share of EVs in all vehicles sold in China is also on track to reach 30% in 2023, while production for the calendar year is set to reach 9m vehicles.
This is only the beginning of the industry’s expansion plans. By 2025, solar-panel production capacity is expected to break 1,000GW (1 terawatt, TW), and battery production capacity to reach 3,000GWh.
What is causing this surge?
The announcement of the 2060 carbon neutrality target provided the political signal, but wider macroeconomic conditions have delivered low-carbon capacity growth far in excess of policymakers’ targets and expectations, with this year’s solar and wind installation target met by September and the market share of EVs already well ahead of the 20% target for 2025.
The clampdown on the highly leveraged real-estate sector, starting in 2020, led to a steep drop in the demand for land, commodities, labour and credit for apartments and associated infrastructure. This left a hole in the finances of local governments – which rely on land sales for a lot of their revenue – and hit economic growth rates.
Local governments were, thus, searching for alternative investment opportunities to drive economic growth. Yet, at the same time, their investment spending was under scrutiny due to debt concerns. China’s high-level environmental and industrial policy goals made cleantech one of the acceptable sectors for their investment.
At the same time, the government made it easier for private-sector companies to raise money on the financial markets and from banks, as part of measures to stimulate the economy during the pandemic.
The low-carbon energy sector, in contrast with the fossil fuel and traditional heavy industries, is largely made up of private companies. Access to credit had earlier been a major bottleneck for them in a financial system that has heavily favoured state-owned firms.
As a result, much of the bank lending and investment that previously went into real estate is now flowing to manufacturing – largely cleantech manufacturing – as well as to cleantech deployment.
Local government enthusiasm for attracting investments to their regions meant that they often also offered major direct or indirect subsidies. Reportedly, it is common for local governments to build an entire factory and associated infrastructure, with the private company going on to occupy the site only covering the cost of machinery and operations.
All of this happened at a time when falling costs driven by technological learning and subsidies resulted in many low-carbon energy technologies becoming economically competitive against fossil fuels.
China’s policymakers had favoured “green” investments previously, as in the 2009 stimulus package launched in response to the global financial crisis. Yet the sector had been too small to absorb the huge amount of credit mobilised as a part of China’s stimulus cycles. After experiencing extremely rapid growth since 2020, this has changed.
The construction of low-carbon energy manufacturing capacity, production of low-carbon energy equipment and construction of railways have been significant drivers of commodity demand this year, as the only areas of investment showing substantial growth.
This demand explains, among other things, why China’s steel output has continued to grow despite the ongoing contraction in real-estate construction.
Conversely, the precipitous drop in demand for commodities from the real estate and conventional infrastructure sectors explains why the breakneck expansion of low-carbon energy sectors – and their commodity demand – has not resulted in a spike in prices.
The unprecedented investment in low-carbon technology manufacturing supply chains also means that China has, in effect, placed a major economic and financial bet on the success of the global energy transition, which could affect its diplomatic positioning.
What comes next for China’s emissions peak and decline
Now that low-carbon energy expansion has reached the scale needed to start driving down China’s emissions, the most important question is: will its growth continue?
China’s low-carbon energy boom resulted from the confluence of numerous factors. There was – and is – clear political commitment and direction. The contraction of the real-estate market provided a push and an opportunity for the redirection of capital and investments into the renewable energy sector.
Technological learning and aggressive industrial policy improved quality and cut costs to the point where the market for low-carbon energy technologies started to expand rapidly.
It is also clear that the wave of manufacturing investment has resulted in significant overcapacity in the production of solar panels, batteries and EVs, among others, though the scale of this excess depends on the pace of the global energy transition.
This overcapacity is likely to be resolved – as in previous rounds of expansion – through consolidations and outright failures of individual players. Meanwhile, however, it will continue to depress the prices of low-carbon energy equipment.
Politically, the major challenge will only come when low-carbon energy begins to substantially cut into the demand for coal and coal-fired power.
This shift threatens the interests of the coal industry and local governments with a high exposure to the coal sector. These stakeholders could be expected to resist the transition, raising concerns about potential roadblocks.
When contraction in demand and capacity additions resulted in overcapacity in coal-fired power around 2015, coal power interests successfully argued that low-carbon energy deployment had been too fast.
As a result, the rate of low-carbon energy capacity additions slid down from 2015 until 2019, as seen in the figure above, making more space for excess coal capacity to generate power.
A similar balancing act could come into play once again, as coal and low-carbon generating capacity both continue to expand, competing to meet limited rises in demand.
The Chinese government and its advisers have argued that new coal power plants will not result in a surge in emissions, as they will be used for flexible operation at low utilisation.
China’s climate targets do not yet reflect this belief, however. Its combination of intensity and low-carbon deployment targets would allow emissions to increase by another 10-15% from 2022 levels and only peak at the end of this decade.
If the government wanted to more firmly cement the low utilisation of newly built coal plants, it could do so by moving towards an absolute cap on power-sector emissions under its emissions trading system – or by setting a limit on China’s total CO2 emissions.
As the government weighs these decisions, it is faced with a dramatically larger set of economic drivers and interests in the low-carbon energy sector, as compared with 2015.
These conditions could offer the motivation for policymakers to push a faster domestic transition away from fossil fuels. They also mean that China has an increasingly significant financial stake in the success of the low-carbon transition worldwide.
Data sources
Data for the analysis was compiled from the National Bureau of Statistics of China, National Energy Administration of China, China Electricity Council and China Customs official data releases, and from WIND Information, an industry data provider.
Power sector coal consumption was projected based on power generation, to avoid the issue with official coal consumption numbers affecting 2022–23 data. September 2023 data on apparent coal consumption was not available at the time of publication, so coal consumption in different sectors was projected based on the output of relevant industrial products – for example, coke for the consumption of coking coal; cement and glass for building materials industry. Coal consumption for heating was projected based on population-weighted average heating degree days calculated from NCEP gridded daily weather data.
When data was available from multiple sources, different sources were cross-referenced and official sources used when possible, adjusting total consumption to match the consumption growth and changes in the energy mix reported by the National Bureau of Statistics.
CO2 emissions estimates are based on National Bureau of Statistics default calorific values of fuels and IPCC default emissions factors. Cement CO2 emissions factor is based on 2018 data.
For oil consumption, apparent consumption is calculated from refinery throughput, with net exports of oil products subtracted.
The post Analysis: China’s emissions set to fall in 2024 after record growth in clean energy appeared first on Carbon Brief.
Analysis: China’s emissions set to fall in 2024 after record growth in clean energy
Several major banks that helped set up the UN’s now-defunct Net-Zero Banking Alliance (NZBA) in 2021 have since continued to lend money to coal companies, a new report has revealed.
Bank of America, Barclays, Citibank, Deutsche Bank and Santander were heavily involved in the NZBA and the associated Glasgow Financial Alliance for Net Zero (GFANZ) when it was launched by Mark Carney, then a UN climate envoy and now Canada’s leader, in the run-up to the COP26 climate summit in Glasgow.
Despite their involvement, data released this week shows those banks and some others did not reduce the amount of money they lent, nor the value of their underwriting, to coal activities between 2022 and 2025. Around half of the NZBA members who were engaged in coal financing over that time increased it and half cut it, according to the report by German environmental research group Urgewald.
Ana Botín, executive chair of Santander, was a member of the GFANZ CEO principals’ group and said at the time of the NZBA launch that her Spanish bank was “proud to be part of the founding members of this new alliance and to accelerate progress towards net zero”.
Since then, the report’s data documents that Santander has provided loans and underwriting worth hundreds of millions of dollars each year to coal companies, particularly American coal-power plant operators Duke Energy and the Southern Company. Santander did not respond to a request for comment.
Urgewald’s research adjusts the value of loans and underwriting provided to coal companies based on how much of a company’s revenues come from the most polluting fossil fuel. So a hypothetical $100 million loan to German utility RWE is valued at $21 million, as 21% of RWE’s revenue is from coal.
The research does not take account of whether companies are expanding their coal business or phasing it out for greener alternatives. Some banks have said their coal clients need to put in place transition plans by a certain date. Some also say that, by a certain date, they will stop lending money to clients that get more than a set percentage of their revenue from coal.
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In his last speech to the UN General Assembly, António Guterres for the first time called on every nation to deliver a plan to phase out coal, oil and gas while protecting workers
Most companies expanding coal are in Asian nations like China, India and Indonesia and are largely financed by banks from their own countries. But there are examples of NZBA founding members supporting companies that are actively prolonging the life of their coal businesses.
For example, Glencore, a Switzerland-based multinational that gets 4% of its revenue from coal, has just won preliminary regulatory approval to keep on coal mining in Australia’s Hunter Valley until 2045. Last year, the company was supported by loans and underwriting from Bank of America, Citigroup, Santander, Barclays, Deutsche Bank, HSBC and Standard Chartered.
Good and bad news
Some NZBA founding members like Swiss giant UBS have reduced their loans and underwriting for coal companies, the data suggests. Others – like Triodos and Kenya Commercial Bank – have provided no support for coal companies since at least 2021.
Urgewald researcher Hannah O’Neill told Climate Home News that “the banking sector is not moving in one direction. There is a growing divide between banks that are tightening their coal policies and reducing their exposure, and those where coal policies remain weak or where financing continues.”
Unlike the UN’s Race to Zero campaign, with which it partnered, the NZBA did not require its members to end financing for fossil fuels like coal, leading to accusations by climate campaigners that its rules were too weak.
Despite this, after Donald Trump’s re-election as US president in November 2024, several North American banks quit the alliance and the NZBA’s requirements were diluted in April 2025. After further withdrawals, the group shut itself down in October 2025.
Globally, the Urgewald report found that many banks in the European Union, Thailand, Malaysia, India and Taiwan have reduced their coal finance since governments agreed at COP26 to phase down coal power.
But with Chinese, American, Indonesian and South Korean banks increasing their support, total bank financing for the coal industry has remained broadly the same each year since 2022.
“Coal financing is not disappearing – but it is concentrating in banks and markets where coal policies are either missing or weak,” said Heffa Schücking, director of Urgewald.
Urgewald’s definition of coal companies includes firms and their subsidiaries that explore for, process, trade, transport and mine coal, or burn it in power plants to produce electricity, or manufacture equipment for the coal industry. It does not include companies that use coal to make cement or steel – and an adjustment is made to account for how much of the business model is coal-related.
Banks defend delays
At the time of publication, most of the banks named in the report for increasing their coal finance had not responded to requests for comment. But a spokesperson for Deutsche Bank pointed Climate Home News to its May 2026 announcement that it was delaying its requirement for existing clients to present it with transition plans and cut their coal exposure.
Instead of having to present these plans by the end of 2025, the bank has given them until the end of 2027. They will also have to ensure that their revenue share from thermal coal falls below half by then, the bank added. New clients need energy transition plans to access finance.
Deutsche Bank said at the time it was delaying its requirements because of the “increasingly complex regulatory environment as well as differing speeds of energy transition in various regions beyond what was anticipated by Deutsche Bank in 2023”.
Big banks’ lending to coal backers undermines Indonesia’s green plans
A spokesperson for Barclays told Climate Home News: “Many companies in this report are diversified energy or mining companies. We do not provide financing to companies that generate more than 30% of revenues from thermal coal mining or power generation, and we will phase out all financing by 2035.”
The Barclays spokesperson added: “Barclays is financing an energy sector in transition, providing finance to meet current energy needs and also financing the scaling of clean energy. Over the past three years, we have facilitated more than $300 billion of sustainable and transition finance, including billions to cleaner energy projects, and invested millions into climate tech.”
The post Big banks behind “net zero” alliance continued lending to coal firms appeared first on Climate Home News.
Big banks behind “net zero” alliance continued lending to coal firms
Harjeet Singh is the global convenor of the Fill the Fund campaign and founding director of the Satat Sampada Climate Foundation. Julie-Anne Richards is strategic campaign lead for the Make Big Polluters Pay campaign in Australia.
This year, a glacier collapse in Nepal’s Himalayan valleys swept away the lives of at least 1,500 people, with recovery costs of US$5 billion, or 10% of national GDP. But this was not a tragedy for which no one can be blamed. This was a crime with a balance sheet – one whose costs are paid by people who did nothing to cause it, and whose profits are booked by polluting corporations that did everything.
Across the Pacific, the calculation of injustice is now brutally clear. According to Oxfam Australia, the average yearly GDP loss of Pacific countries from climate disasters has increased four-fold over the last decade, reaching 14.3% of GDP. The number of Pacific people battered by climate disasters has risen by 700% in a decade. Whole villages are being packed up and moved as the sea takes the land beneath them.
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What’s on the climate calendar for October 2026?
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Let’s look at the other ledger. This year, as climate change and an oil shock drove up the cost of living for ordinary families, Woodside – touted as “one of Australia’s biggest winners” from the war in the Middle East – reported revenues jumping nearly 30% to AUD$6 billion in just three months.
In Australia, Oxfam finds that in 2023-2024, fossil fuel corporations paid only AUD$22.8 billion in corporate income tax – just 5% of their AUD$436 billion in total reported income – while 26 out of 80, or one in every three large fossil fuel corporations, did not pay corporate income tax at all.
The polluters are not struggling to pay for the damage they cause. They are choosing not to.
This is the moral obscenity at the heart of the climate crisis: the money exists. It is simply flowing in the wrong direction. And nowhere is that clearer than in the funds the world built to protect the vulnerable, now left to languish.
Funds struggle to fill their coffers
The Fund for Responding to Loss and Damage (FRLD) has received US$2.8 billion in requests from 119 countries. And Nepal has sought an urgent US$20 million for immediate needs. Yet the Fund has only US$342 million in total to give.
The Pacific Resilience Facility – a fund the Pacific designed for itself, to prepare its own communities – sits well short of even its modest US$500 million capitalisation target. And the Adaptation Fund is running on empty. While adaptation needs in developing countries could reach US$387 billion a year by 2030, according to the latest UNEP Adaptation Gap report, the Fund’s resource mobilisation target of a modest US$300 million for 2025 fell far short, with only US$135 million pledged.
This is a matter of priorities, not of resources. For decades, the world has accepted a simple principle – the polluter pays principle – whether through the OECD, of which Australia is a member, or Europe’s carbon pricing. New York and Vermont have already passed laws to make Big Oil pay into climate superfunds, and ten more US states are moving to follow.
The idea is neither radical nor new. It’s time to make big polluters pay.
Comment: After Hormuz, Nepal and wildfires, people want action to make polluters pay
What is urgently needed is the courage to apply it to the fossil fuel corporations that have spent decades avoiding it. In November, Australia takes up the presidency of the COP31 negotiations, committing to stand shoulder to shoulder with its Pacific neighbours.
Australia, together with the Turkish COP31 Presidency, must guide and inspire progress at the upcoming climate conference, including on new climate finance pledges by developed countries (which agreed to mobilise at least $300 billion by 2035) and triple the funds available to the FRLD, the Adaptation Fund and the other UN climate funds.
Rich countries agreed to these goals two years ago at COP29. Yet, the reality is that developing countries’ need for climate finance is in the trillions annually, while developed countries continue to delay providing even what they have already committed. A clear signal recognising the importance of delivering the promised climate finance must come at next week’s Pre-COP in the Pacific, and COP31 in Antalya must go on to deliver against existing promises or risk an irreparable breakdown in trust.
Time for a climate pollution levy
Countries must also ensure funding for loss and damage takes its rightful place as the third pillar of climate finance, alongside mitigation and adaptation, in negotiations regarding the UNFCCC climate finance work programme and Article 9 on shifting finance flows towards a low-carbon, resilient world.
Australia, as President of Negotiations and as a Pacific nation, cannot ask the world to fill these funds while it lets its own coal and gas giants off the hook. Australia should not only stop approving new and expanded coal and gas mines, it should also introduce a Climate Pollution Levy on big coal, oil and gas corporations – a charge on every tonne of carbon pollution they extract and profit from. Independent analysis shows such a levy could raise tens of billions of dollars a year, and can be designed so the cost falls on the corporations, not on households.
This is not charity – it is compensation. It is the beginning of accountability. And the public is far ahead of its leaders: eight in 10 people worldwide, and a clear majority of Australians, want fossil fuel firms taxed to pay for the damage they cause.
Fossil fuel expansion threatens COP31 hosts’ credibility, experts warn
The money must go where the harm lands. A Climate Pollution Levy should feed the funds frontline communities are relying on – fully capitalising the Pacific Resilience Facility this year, replenishing the Adaptation Fund, and delivering the billions the loss and damage fund needs.
It is essential for these funds to be able to provide grant-based finance that reaches communities directly, not more loans that push drowning nations deeper into debt. With Nepal’s recovery costs estimated at around 10% of the country’s GDP, if we leave it to fend for itself without loss and damage funding, Nepal will likely be saddled with debt and could fail to recover adequately, increasing poverty and inequality.
We have heard enough empty pledges. We have watched enough funds announced with fanfare, only then to be starved in silence. The era of asking polluters politely is over. Australia, as COP31 president, has a rare chance to prove that the polluter pays principle means something and apply it to those who have profited the most.
The post As COP31 co-host, Australia should make its polluters pay for climate damage appeared first on Climate Home News.
As COP31 co-host, Australia should make its polluters pay for climate damage
This is a republication of October’s edition of The Climate Agenda – a subscriber-only newsletter designed to keep you informed of the key events, negotiations and announcements happening every month. If you want to receive The Climate Agenda straight to your inbox at the start of each month, sign up as a subscriber today.
This month, we’ll be on the ground reporting from the Convention on Biological Diversity summit in Yerevan, Armenia later this month and following all the developments as we build towards COP31 in Antalya, Türkiye next month. Here’s what you need to know for October, why it matters and what to expect.
Brazilian Election
First round: Sunday 4 October – Second round: Sunday 25 October
This poll is being closely watched by Brazilian environmentalists as it’s likely to make a big difference to Brazil’s international climate politics and the health of the Amazon rainforest.
The two clear front-runners are current left-wing President Lula and right-wing Flávio Bolsonaro. Flávio is the son of Jair Bolsonaro, who ruled from 2019 to 2023 but was declared ineligible to hold public office because of his attacks on the electoral system and is now under house arrest.
In the unlikely event that either candidate wins more than half the votes in the first round, they will be elected as the country’s leader. Latest polls have Lula on 39% and Bolsonaro on 35% (though the numbers are shifting) with several minor candidates in the single-digits. If none of them get a majority, there will be a one-on-one run-off on October 25.
The Latin American nation is set to record its lowest-ever level of deforestation, as efforts to rein in illegal clearing and restore Indigenous rights progressed under Lula. But Brazilian experts are warning that the huge agribusiness lobby in Congress, whose interests shape what happens in the Amazon, will be emboldened if Bolsonaro takes power, with the Supreme Court also risking a turn to the right.
As for climate politics, some seasoned watchers fear that Flávio – a climate change denier like his dad – could even try to pull Brazil out of the Paris Agreement. That would leave other countries to take forward Brazil’s COP30 global roadmaps on transitioning away from fossil fuels (TAFF) and ending deforestation – both of which are due to be delivered by COP31.
For Brazil’s own TAFF roadmap – commissioned earlier this year but so far nowhere to be seen – the election may have less of an impact, given Lula is as keen as any other politician to extract oil and gas from the Amazon, amid cross-party support for fossil fuel production.
Read more: Brazil leads “encouraging” decline in global rainforest destruction in 2025
Pre-COP
Monday 5 October – Thursday 8 October – Fiji and Tuvalu
The annual Pre-COP meeting is usually a business-like gathering of government negotiators, sounding out each other’s positions and laying the groundwork for deals at the main COP summit. But this year’s “pre” has been jazzed up by Australia’s partnership with Pacific governments keen to elevate their climate issues on the international stage.
“We will bring the eyes of the world to our region, highlight the threat that climate change poses to it, and show how Pacific voices are shaping global action to counter it,” Australian PM Anthony Albanese said of the event.
On Monday, before the Pre-COP officially starts, a group of senior government figures – including a handful of leaders – will visit the world’s second lowest-lying nation Tuvalu, as UN boss Antonio Guterres did in 2019.
They will visit areas affected by sea level rise, see climate resilience projects and meet local communities before flying 2.5 hours south to Fiji to join up with the Pre-COP – which starts on Tuesday – and speak at a “Leaders’ plenary session” that evening.
The Pre-COP runs until Thursday. Governments are expected to try to advance on some kind of a roadmap for protecting oceans from climate change, while Fiji says Pacific nations will emphasise the need to follow science and step up efforts to limit warming to 1.5C.
Australia is also due to present an action plan to improve access to climate finance for small island nations and least-developed countries, so that governments, development banks and climate funds can endorse it ahead of the Antalya summit.
Alongside the official Pre-COP discussions, a “green zone” will host talks organised by civil society on topics like public transport, carbon markets and the International Court of Justice advisory opinion. Unfortunately, these events won’t be available to follow online.
Read more: Threatened by rising seas, small islands secure right to keep their statehood
Read more: At regional summit, Pacific islands ask for COP31 support for clean energy and finance
Article 6.4 Supervisory Body
Monday 5 October – Friday 9 October – Bonn, Germany
The UN carbon market’s rule-making body meets for one last jam-packed session ahead of COP31, with decisions pending on several high-stakes issues that could shape the future of the new crediting mechanism.
Top of the agenda is a rulebook for clean cooking projects, which aim to cut greenhouse gas emissions by distributing more efficient cookstoves. These projects generate some of the most popular carbon credits but have also drawn some of the heaviest criticism for overstating their climate benefits through lax accounting.
Technical experts have recommended the Supervisory Body tighten the rules compared to existing crediting programmes, including by forcing cookstove project developers for the first time to guard against the risk of the climate benefits of their credits – the trees saved from becoming cooking fuel – being wiped out by fire, drought or logging.
The proposal on the so-called reversal risk assessment has sparked a “coordinated” lobbying campaign from the industry, some conservation NGOs and UNEP, arguing that stronger protections could hike project costs and restrict the supply of credits.
Read more: Industry and NGOs lobby to weaken UN carbon credit rules in “coordinated” push
Intergovernmental Panel on Climate Change (IPCC) plenary
Monday 12 October – Friday 16 October – Addis Ababa, Ethiopia
Scientists and government officials will try, once again, to agree on a timeline to produce the highly influential AR7 assessment report from the UN’s climate science body.
The faultlines that have blocked a deal at several previous sessions are well established: a large group of predominantly developed countries, small island and progressive Latin American states and the poorest nations want the reports to be ready in time to inform the UN’s next global assessment of climate action, due to be completed in November 2028.
A small group of primarily big emerging economies disagree, claiming this timeline would put a burden on developing countries with limited resources and restrict their ability to provide scientific input into the process.
Three options will be on the table in Addis Ababa. Two of them would see all three flagship assessment reports approved by July 2028 and September 2028 respectively, just in time to feed into the second Global Stocktake.
The third, based on proposals from Saudi Arabia and India, would deliver only the Working Group 1 report, on the physical science of climate change, by May 2028. The reports from Working Groups 2 and 3, covering climate impacts and ways to cut emissions, would not be approved until mid-2029, well after the stocktake concludes at COP33.
Delegates are also expected to discuss the IPCC’s increasingly strained budget, made worse by a funding gap left by the withdrawal of the United States. The panel has warned that, without a sustained increase in contributions, its trust fund’s cash balance would run out by the end of 2028, putting the delivery of the AR7 set of reports at risk and forcing cuts to in-person meetings, translation and outreach.
Read more: Science ‘under attack’ from fossil fuel interests at UN climate talks
Read more: As science comes under attack at UN talks, climate movement splits over how to respond
World Bank & IMF Annual Meetings
Tuesday 12 October – Sunday 18 October – Bangkok, Thailand
With their biggest shareholder – the US – resolutely opposed to climate action, the World Bank and International Monetary Fund (IMF) are likely to try to avoid mentioning climate change at their annual meetings in Bangkok – and there are no headline events on the subject.
But they aren’t in complete control of the agenda. Thailand will host a discussion on financing a green resilient economy and World Bank President Ajay Banga is likely to be challenged on climate at a live-streamed civil society townhall on October 12.
With tricky negotiations on the World Bank’s climate finance target concluded earlier this year (it was dropped), talks are moving on to the sustainability framework of the World Bank’s International Finance Corporation, which invests in the private sector. Civil society is calling for its rules on protecting people and the planet to be maintained and strengthened.
The IMF’s guidance note to staff – which shapes the circumstances under which climate can be included in IMF programmes – will also be negotiated. Longer term, the Resilience and Sustainability Trust, which channels funding to green projects, will be reviewed but not before 2028 at the earliest.
Read more: World Bank’s climate work can endure without finance target, experts say
Convention on Biological Diversity (CBD) COP17
Monday 19 October – Friday 30 October – Yerevan, Armenia
The biodiversity COP – a sister convention to the UN climate process – will for the first time take stock of progress towards key goals in its 2022 landmark agreement, the Global Biodiversity Framework (GBF). These include a headline target to protect and conserve at least 30% of the planet’s land and marine ecosystems by 2030.
A draft report prepared by a scientific panel warns that “unless collective implementation accelerates rapidly, the 2030 targets and mission will not be achieved”. In fact, governments are failing on 22 out of 23 targets. The final report is expected to be published ahead of COP17, where governments are expected to react strongly.
UN biodiversity chief Astrid Schomaker told journalists earlier this month that the most significant progress is expected to occur towards the end of the decade, as 174 countries took the first four years to develop national targets.
Finance, meanwhile, is set to become a contentious issue, as the draft report says developed countries fell short on a target to provide $20bn per year in international public finance for nature protection, reaching only about $17bn per year from 2020 to 2023. They have also yet to meet a wider goal to mobilise $200bn per year counting all kinds of finance.
Much like in climate talks, the EU has proposed to broaden the base of donors to include emerging economies who want to “voluntarily assume the obligations” of developed countries. Saudi Arabia and Qatar want nothing to do with this proposal. China has said bringing in new contributors should not weaken the obligations of developed countries. Expect a fight in Yerevan.
A preliminary meeting in Nairobi in August resulted in a heavily bracketed text that delegates will have to unravel in Armenia. One observer said countries had “overall missed the level of urgency” needed.
Keep an eye out for our webinar live from Yerevan later this month, where we’ll provide an update on the talks and how governments are responding to science’s demands for quicker action.
Read more: Mombasa ocean summit drives progress on marine protection, but threats persist
Read more: UN biodiversity talks agree finance roadmap, postponing decision on a new fund
European Climate Resilience & Risk Management Framework
Wednesday 28 October – Brussels, Belgium
Following a torrid summer beset by recurring heatwaves, drought and outbreaks of forest fires across the continent, the European Commission will present its keenly awaited climate resilience and risk management framework to help member states protect their populations from worsening climate change impacts.
As part of the policy package, the Commission will identify 100 of Europe’s most climate-vulnerable territories. And alongside an assessment of the risks, there will be guidance at which level they should be managed – regional, national or by the EU. Currently, confusion often arises over who is responsible for preventing, preparing for and managing disasters across the bloc.
The framework will also aim to make Europe a “champion in adaptation technologies” – such as drought-resistant crops, flood prevention or energy-efficient cooling – which have been described by EU President Ursula von der Leyen as “a huge emerging market”.
With only around a quarter of catastrophe losses in Europe covered by private insurance, the Commission also plans to set up a Climate Insurance Alliance to boost that figure.
READ MORE: WHO issues new guidance on heat-health action plans, as El Niño sets in
The post What’s on the climate calendar for October 2026? appeared first on Climate Home News.
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