The impact of climate change is set to leave $90bn (£68.7bn) worth of stranded assets in the Chinese coal-fired power sector under a business-as-usual scenario.
That is according to a new report from the Paris-based Institute for Sustainable Development and International Relations (IDDRI), which reveals China has invested $500bn in coal since 2005.
This investment continues unabated to this day, despite ambitious government plans to deploy low-carbon electricity, and the role burning coal plays in fueling climate change.
The report reveals this has created an overcapacity issue, arguing that retiring China’s coal-power fleet while expanding renewable electricity could cut their losses by $11.8bn.
“The results surprised us as they show that higher climate ambition would actually reduce financial risks for the coal sector”, study co-author, Oliver Sartor, said.
It was also found that coal plants installed in China since 2005 represent 70% of its total capacity, with the report estimating that billions could have been saved if invested elsewhere.
Structural slowing in electricity demand growth, upcoming moves to liberalise electricity markets, and the introduction of a carbon market, are also thought to contribute to the risk of stranded assets in the coal-fired power sector.
However, this situation is not unique to China, with other countries also expected to face stranded assets due to the competitiveness of renewables, and redundant coal power capacities.
“This study shows we need a change in mindset for climate policies: it is no longer enough to support low-carbon sectors; we need to manage transition out of high-carbon sectors,” IDDRI director, Teresa Ribera, said.
“Discussions at the global climate negotiations at the ongoing COP23 need to focus on the underlying levers of transformation as much as headline emissions targets.”
The findings come after IEMA chief policy advisor, Martin Baxter, said that international business and product standards could prove “critical” in tackling climate change.
Speaking at the COP23 climate talks in Bonn, he said standards could ensure businesses play their part in reducing carbon emissions and enhancing climate resilience.
