China, the world's renewable energy leader, could support the shift towards low carbon energy for two-thirds of the world's population by greening the Belt and Road Initiative (BRI).
Experts agree that with the help of more comprehensive policies to divest from coal, Chinese financial institutions could better support the country's BRI strategies in alignment with the Paris Climate Agreement.
Despite China achieving global leader status in renewables with over 700 gigawatts of installed renewable energy capacity, the majority of the country's overseas investments are based on coal projects.
Chinese financing funded more than 50% of global coal power capacity in 2018 - a quarter of which is under development outside of China. Coal power projects accounted for the largest share at 42% of overseas finance in 2018, according to Boston University’s Global Development Policy Center's database of China’s Global Energy Finance.
India, Indonesia, Mongolia, Vietnam and Turkey, respectively are the top BRI recipient countries of China's coal investments, according to the Global Environment Institute.
China's overseas investment policy will be an area on focus, along with the 'quality of the BRI', sustainable development, climate change and renewable energy at the 2nd Belt and Road International Cooperation Forum in Beijing on April 25-27.
China's Ministry of Foreign Affairs announced the forum and said that 37 heads of state are anticipated to participate, a big increase from the 28 in 2017.
Along with the heads of state, around 5,000 participants from over 150 countries and 90 international organizations including the United Nations, World Bank and the International Monetary Fund are also expected to attend.
- Scope of BRI expands
Policymakers and investors are gradually strengthening and promoting coal divestment policies, and actions to shift to renewable energy, according to Li Xiulan, the researcher responsible in Greening the BRI investment project at Beijing-based Greenovation Hub, an environmental Think-Do organization.
"More and more government policymakers and investors are realizing the negative impacts of coal-fired power investments on public health, the environment and society, which lead to increasing financial, reputational risks and the risks from stranded assets under the context of addressing climate change, promoting energy transformation and improving environmental governance," she said.
"China’s BRI strategies and policies are striving for alignment to Paris Agreement goals with its investments in collaboration with host countries," she added.
The initiative has expanded its original scope since 2013. As of March 30, 124 countries and 29 international organizations have signed cooperation agreements with China, up from 68 countries in 2018.
The BRI countries collectively account for at least two-thirds of the world’s population, and a third of global GDP. Although Morgan Stanley estimates that China’s total expenses over the course of the BRI could increase to $1.3 trillion by 2027, other higher estimates of future spending range between $4 trillion and $8 trillion, according to the State Council of China.
Thus, the initiative has some potential to offer a “win-win” solution both economically and environmentally, according to a new Climate Economy report that finds the world will need $90 trillion of infrastructure investment by 2030.
This means clean energy will require $2.4 trillion in investment every year until 2035 to avoid catastrophic climate change, the recent Intergovernmental Panel on Climate Change's Special Report on Global Warming of 1.5 degrees shows.
- "Sustainability" key concept
Bengisu Ozenc, an instructor at Ankara-based Bilkent University, asserts that the BRI should be considered a transformational project in integrating countries rather than merely an infrastructure project.
Although such infrastructure projects are set to have a huge impact on the environment, all infrastructure projects in the context of the BRI would also impact the sustainability figures of any relevant countries.
"By greening BRI, China could be a leader in low carbon transition and this could be an advantage for the country. Along with European countries, we may start seeing the transformative effect of China via BRI," Ozenc underlined.
A study by the World Resources Initiative shows the multi-trillion dollar BRI certainly has huge potential to shape the low-carbon transition in over 80 countries in Asia, Europe and Africa. It estimated that 31 BRI countries would need approximately $470 billion to meet renewable energy commitments, with 54% of this financing allocated for solar PV projects and 19% for wind.
Referring to a recent Greenovation Hub report, Xiulan said the policies of Chinese banks are beginning to address climate change and promote green development while China’s financial institutions, including policy banks, development banks and commercial banks, have yet to form clear and specific policies regarding coal investments.
"The global energy transformation is happening, driven by the dual imperatives of limiting climate change and fostering sustainable growth," she argued.
With the decline in renewable energy costs, more technological improvements and with new opportunities in energy efficiency, digitalization, smart grid and electrification solutions, renewable energy would be accelerated and prioritized, especially in developing countries with abundant renewable energy resources and more demand to promote climate resilience, Xiulan added.
By Nuran Erkul Kaya