- As China implements its Belt and Road Initiative (BRI) earnestly and at the same time pledges to promote green environment and sustainable growth, questions abound on its commitment to achieving both objectives simultaneously.
- How does the BRI relate to the global environmental, social and governance (ESG) initiatives? Is there any evidence for China putting its green incentive into practice while implementing its BRI? What are the challenges that China will face by going green?
- Will China stick to its green promise? What are the forces that will help shape the future of green finance and where does China stand in green financing? What are the opportunities and challenges that China’s actions may present to the world?
As China ascents to the world stage with growing economic influence through its Belt and Road Initiative (BRI), it also wants to showcase its “green” leadership. The incentives to do so should be strong because as the world’s largest greenhouse gas-emitting nation, China’s growth is unsustainable and has negative externalities on the world economy.
BRI to embrace sustainable development but…
In principle, China is trying to embrace in its BRI infrastructure projects five of the 17 areas of the United Nations’ Sustainable Development Goals (SDGs), which were adopted in 2015:
- SDG #6: Clean water and sanitation – ensure access to water and sanitation for all people.
- SDG #7: Affordable and clean energy – ensure access to affordable, reliable, sustainable and modern energy for all people.
- SDG #11: Sustainable cities and communities – make cities and human settlements safe, inclusive, resilient and sustainable.
- SDG #13: Climate action – combat climate change and its impact urgently.
- SDG #17: Partnership for the goals – strengthen the means of implementation and revitalise the global partnership for sustainable development.
However, one of the largest Chinese investment categories in the developing countries is coal-fired power plants. The Global Environment Institute found that between 2001 and 2016, China developed 240 coal-fired power projects in 68 countries, most of which are associated with the BRI since its inception in 2013, for a total of 251 GW of generating capacity or about 25% of China’s domestic coal-fired capacity. This shows that China has yet to deliver its green pledge in the BRI investment.
Hitherto, Beijing has yet to establish the principles to guide environmentally sound investment abroad. Its export of dirty-energy technology undercuts the credits it gets for going green in its domestic energy initiatives. It will have to embrace responsible investment rules to fend off international criticism on its lack of sustainable growth and investment strategies.
Domestic efforts are stronger
However, China has made progress towards some of the SDGs in the domestic system. Environmental policy and enforcement have become more systematic since President Xi came to power in 2013 when the State Council approved a comprehensive action plan to reduce air pollution. This was followed by plans to reduce water and soil pollution in 2015 and 2016, respectively. These plans established local and national targets and time-lines for pollution reduction, taking aim at the highly-polluting sectors. If fully implemented, the plans would amount to the world’s largest ever environmental clean-up effort.
China has also stepped up the pace of environmental innovation, with initiatives in carbon pricing, clean-energy finance and electric vehicles. In June 2017, it rolled out a pilot programme for green finance in five provinces to promote a USD 440 billion spending scheme on environmental protection projects. Then in November, it launched the long-awaited carbon emissions trading scheme, which could become the world’s largest carbon market.
China is now the world’s biggest investor in renewable energy technologies. In 2016, it accounted for almost 50% of the world’s installation of new wind-power capacity. By 2020, China is expected to account for more than a third of the world’s total wind-power capacity. It has also vowed to achieve the international goal of limiting global average temperature increase to less than 2oC through the Paris Agreement.Download to read more