China Pushes for a Green Belt and Road Initiative

Since China first launched its Belt and Road Initiative (BRI) in 2013, Beijing has been criticized for funding polluting activities overseas. But after Xi has recently promised to stop supporting foreign coal projects, criticisms have started to fade away.

Chinese government agencies have been working on plans to make BRI more environmentally friendly and published three documents in the past ten months to that end. The most recent of these that was released in March included the state’s top economic planner, the National Development and Reform Commission (NDRC). The document asked for clear progress towards a green BRI. The NDRC also said that China will “completely stop building new projects,” repeating Xi’s announcement ahead of last year’s COP26 climate summit.

The document also urged developers to proceed with caution when it comes to BRI coal power projects currently under construction. China also asked that upgrades to operating coal power plants be in line with international green rules and standards. The regulations so far had asked that projects should abide by host countries’ environmental standards, an approach that has led to poor practices in some nations.

Despite those positive signals, BRI still lacks effective regulations that ensure the program to help fight climate change rather than make it worse. While air and water pollution is strictly regulated in China, the government hasn’t announced measures for continuing to finance coal overseas and doesn’t provide transparent information on the BRI.

Considering Chinese politics, the most effective way to achieve a green BRI could be a direct commitment from top leadership. But at the same time a progress on policy is also needed.

Following the eight months since Xi’s statement that no new coal-fired projects will be financed, a total of 12.8 gigawatts of Chinese overseas coal projects have been canceled.

But the boundaries of the new policy is still uncertain. China has eased restrictions on fossil fuels at home following concerns of an energy shortage, which could hamper economic growth.

Following China’s push for a green BRI, as much as 19.2 gigawatts of coal projects that already secured financing, contracts or permits are now on a tight rope. The lack of clarity around Xi’s declaration in September has left plenty of space for developers to get projects approved. For example, two new BRI coal-fired power plants have secured construction and purchasing agreements from Chinese firms after Xi’s pledge.

China could hit two birds with one stone if it moves the BRI away from coal. It could position China as a climate leader, and avoid investment risks. Local pushback against the environmental impacts have already halted some projects. UN Panel on Climate Change has warned that coal assets are at risk of becoming stranded before 2030, and stressed that finance is a critical enabler in the energy transition.

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