Is the Belt and Road Initiative Going Green?

The Belt and Road Initiative is a landmark Chinese infrastructure project that aims to establish global trade routes from Eastern Asia to the Southern tip of Africa. A primary goal of the initiative is to develop energy grids in Southeast Asia and Africa. Energy investment into these regions will spur industrialization, however questions over the sustainability of these investments has arisen. Many of the energy projects associated with the Belt and Road Initiative are from non-renewable energy sources.

China is the largest overseas coal financier, from 2013 to 2018 half of all overseas coal plants were funded by public Chinese institutions. In September of 2021, using only a single sentence, Chinese President Xi Jinping pledged to end all new coal production, announcing the end of Chinese international coal financing. After the announcement, 15 overseas coal power projects ceased construction. This declaration has been met with suspicion from environmentalists because it does not end all projects which have begun development.

Chinese coal financing lacks clear rules and regulations. Despite the cancellation of some coal projects, 18 plants continue development. It is unclear what the criterion is for whether a particular project will continue or be shuttered, and this uncertainty puts “the end of Chinese overseas coal projects” in doubt. Xi’s brevity has created a grey area for Chinese coal investment. Some speculate that the move is not a grand show of support for an energy transition, but rather a method of mitigating financial risk associated with financing coal power in developing nations. This theory coincides with some coal projects being cancelled while others continue.

China ending international coal financing would be a major step in promoting sustainable growth in the developing world. Developing economies need energy investment to grow industries and modernize. However, coal power’s impact on air pollution and its contribution to climate change pose long-term threats to the global ecosystem. Furthermore, countries must take loans from the Belt and Road Initiative to pay for coal plants. These loans will take an upwards of two decades to fully payoff, in this time it will be difficult to secure financing for a large-scale renewables project. This is a phenomenon known as “lock-in”, where countries are unable to transition towards a more sustainable energy due to previous financial commitments to fossil fuels. Coal lock-in poses a major challenge to global climate initiatives and complicates emissions reductions goals.

The upshot of China’s no new coal declaration is that it appears that the Belt and Road Initiative will not seek out new partners on coal projects. While the existing projects are not entirely being cancelled it is important to note that no new projects have been announced since Xi’s pledge. The vagueness of China’s stance on new coal power is worrying, however the commitment provides a more optimistic view on the future of energy investment in developing countries. China’s role in coal financing may have been crowding out renewable investment which will now be more competitive, and China’s own renewable projects in the Belt and Road Initiative will likely increase. While China is still far from perfect on sustainable energy investment the country’s commitment to no new coal, will lead to positive change over the coming decade.

Sources:
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Agence France-Presse. “China Axes 15 Coal Plants Abroad After Xi Pledge, but Loopholes Remain: Study.” Https://Www.bangkokpost.com, Bangkok Post, 22 Apr. 2022, https://www.bangkokpost.com/business/2298794/china-axes-15-coal-plants-abroad-after-xi-pledge-but-loopholes-remain-study#:~:text=Business-,China axes 15 coal plants abroad,pledge%2C but loopholes remain%3A study&text=China has vowed to become,cover fossil-fuel investments abroad.
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