5/18/23, 6:40 PM A Greener Belt and Road Initiative?

China's Commitment to Sustainability | Chicago Policy Review

A Greener Belt and Road Initiative?

China’s Commitment to Sustainability
Yici Wang - March 15th, 2023

In March 2022, China released a set of

opinions to push green infrastructure
development in its Belt and Road
Initiative (BRI), a trillion-dollar strategy
to fund infrastructure projects across
100 countries. Under its “Opinions on
Jointly Promoting Green Development
of the Belt and Road,” China pledged to
develop green capabilities of overseas
enterprises and encourage domestic Source: Getty Images
renewable energy companies
to go global.
The “Opinions” are ambitious. They establish time-bound targets and demand clear progress “towards a
green BRI by 2025.” The projects for green development range across green infrastructure, energy,
transportation, industry, and trade. The “Opinions” could encourage drastic investment into greening
the BRI. However, parts of the “Opinions” are vague and need clarification to be fully effective.
Why now?
Although the BRI was established in 2013, China published the “Opinions” now to address emerging
market and developing economies’s (EMDEs) urgent need for BRI targets. These opinions increase
pressure on EMDEs, countries that have lower levels of income than developed economies, to quickly
decarbonize and to transform to renewable energy. Under the International Energy Agency’s Net-Zero
Emissions scenario, EMDEs will require annual investments of $157 billion in solar power, $243 billion
in wind power, and $133 billion in electric vehicles (EVs) during 2026–2030. Due to the Russia-Ukraine
conflict, EMDEs have less access to renewable energy, which EU countries are purchasing
at higher prices.
Greening the BRI aligns with China’s strategy of driving sustainability. In
September 2020, China announced its goals to achieve peak carbon Greening the BRI
emissions by 2030 and carbon neutrality by 2060. It serves China’s aligns with China’s
national strategy to reduce emissions along the BRI, which creates large strategy of driving
emissions by funding roads, ports, and transport infrastructure, and sustainability
helps China respond to criticisms. The World Wildlife Fund and HSBC, for
instance, warned that BRI could impact many critical biodiversity spots
and endanger 265 threatened species.
China has also developed capabilities to meet the increasing demands for green energy. As the world’s
largest manufacturer of solar panels, wind turbines, batteries and EVs, China is well-positioned to bring
low-carbon technologies to EMDEs. China’s domestic market has already scaled up several low-carbon
technologies that could help advance the green development of the BRI.
How effective are the “Opinions”?

https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/#:~:text=In September 2020%2… 1/4

5/18/23, 6:40 PM A Greener Belt and Road Initiative? China's Commitment to Sustainability | Chicago Policy Review

The “Opinions” emphasize green finance, technology, and standards as key pillars to greening the BRI.
They are the backbones of infrastructure projects and are evolving quickly.
Building low-carbon infrastructures entails high upfront investment costs, incurring high risks for
investors. The “Opinions” seek to mitigate such risks. For example, Article 18 asks financial institutions
to assess projects’ environmental impact before investing and to adopt the Green Investment Principles
(GIP) , an international initiative requiring signatories to establish green investment goals.
The “Opinions” also call upon financial entities to issue more green bonds, a financial instrument used
to fund environmentally friendly projects. Green bonds are also a win-win solution. For issuers, banks
can’t fund all projects on their own, so they need bonds to mobilize private capital for green BRI projects.
For institutional investors, green bonds issued by the Chinese government are low risk since the
Chinese banks are stringently supervised.
China is advancing quickly in green finance. During the first half of 2021,
China is advancing the China Development Bank issued $3.1 billion of green bonds and
quickly in green became the world’s seventh largest issuer. However, few of the bonds
finance adhere to international standards, and Global Environmental, Social, and
Governance (ESG) investors question the legitimacy of the Chinese
standards and fear their inability to detect greenwashing claims. China
recognizes this challenge in the “Opinions” by calling for the alignment of standards and taxonomies. It
also proposes to publish more industry regulations and guidelines in line with international standards to
mitigate risks for investors.
Technology is another success determinator of green infrastructure projects in BRI. As the cost of green
technologies falls, BRI projects yield increasing economic and environmental benefits. Many low-carbon
technologies–from solar and wind power to battery storage and EVs–have become technologically
feasible and commercially viable. To further encourage innovative development of sustainable
technology, the “Opinions” support the building of environmental technology demonstration and
promotion bases, as well as green science and technology parks.
While the “Opinions” are comprehensive in outlining next steps, their language remains ambiguous.
Article 14, for example, states China will “cautiously implement existing coal power projects.” What
counts as existing projects, however, remains unclear. Projects under construction will survive, but
projects that are being planned may pass as well. The word “cautiously” also doesn’t specify what the
Chinese government will do; it may haul or allow projects that encounter difficulties.
Such ambiguity in language can fail an ambitious plan. In September 2021, Chinese President Xi pledged
to stop building new coal plants overseas. The pledge led to the immediate cancellation of several
overseas projects, but since the pledge didn’t specify the definition of “new”, it enabled dozens of
developers to build plants. Developers could push through projects that are on the verge of construction
or are located inside industrial parks. Five months after Xi’s pledge, for example, a Chinese company
signed a contract to build a new coal plant at an Indonesian industrial park.
Going forward, China needs to be closely watched
Despite being hammered by the Chinese pledge, the coal industry
remains lucrative. The research organization Just Finance reported that Despite being
Chinese state-owned companies racked up nearly $19 billion in new coal hammered by the
power contracts abroad in 2021. The coal industry landscape will create Chinese pledge, the
enough incentives for Chinese firms to exploit policy loopholes. coal industry
Therefore, China’s move on greening the BRI should be closely watched. remains lucrative.
EMDEs will benefit if the “Opinions” are implemented successfully. If
implemented poorly, the BRI could lock countries in debt traps and cause

https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/#:~:text=In September 2020%2… 2/4

5/18/23, 6:40 PM A Greener Belt and Road Initiative? China's Commitment to Sustainability | Chicago Policy Review

financial losses. According to the World Economic Forum, today’s infrastructure investment decisions
will lock in the emissions trajectories of emerging and developing economies for decades.
As EMDEs face an urgent need to improve sustainability, large-scale progress in green investment,
technologies, and standards are essential. The ambitious “Opinions” address these areas, but despite
being issued by four ministries –a solid endorsement by the central government — the “Opinions” have
no legally binding power and cannot be enforced in court. Thus, to motivate private parties, which are
key in greening the BRI, China needs to specify pathways to reduce environmental risks and formulate
green development guidelines for its overseas investment projects.
Further clarification of the policy is required to ensure good implementation, rather than violations such
as those in China’s previous coal pledge. With clarification, Chinese banks are often quick to follow. The
Exim Bank, a major state-owned financial institution of China, issued $425 million in green bonds for
clean energy investment a few months after the government published green guidelines for financial
institutions. Now that Xi has secured his third term and pledged support for the country’s green
development in the 20th Communist Party Congress, the BRI will become his flagship project as he is
likely to follow through on his green pledge. Hopefully it comes with more implementation plans soon.

Chinese National Development and Reform Commission, Ministry of Foreign Affairs, Ministry of Ecology and Environment, and Ministry of Commerce.
(2022). Opinions on Jointly Promoting Green Development of the Belt and Road.

Abiad A, Bluedorn J, Guajardo J, & Topalova P (2015). The rising resilience of emerging market and developing economies. World Development.

Gawel A, Song S. (2022). Advancing the Green Development of the Belt and Road Initiative: Harnessing Finance and Technology to Scale Up Low-Carbon
Infrastructure. World Economic Forum.

n.d. (2017). Greening the Belt and Road Initiative: WWF’s Recommendations for the Finance Sector. World Wildlife Fund [WWF] and HSBC.

Jaghory D. (2022). Chinese Cleantech: 2022 Marks Year of Transition for Wind and Solar Policy. Global X.

Cheng L, Chen Y, Baxter T, Boyle J, Seow W. (2021). Stepping into the Net Zero Era. GIP.

Zhang M, Zhang C, Li F, Liu Z. (2022). Green Finance as an Institutional Mechanism to Direct the Belt and Road Initiative towards Sustainability: The Case
of China. Sustainability.

De Boer D, Wang C N, Fan D. (2022). China’s Government Clarifies its Vision for a Green Belt and Road Initiative. CCICED.

Pike L. (2022). China’s promise to stop building coal plants overseas is full of caveats and loopholes. Grid.

Chen H, Shen W. (2022). China’s no new coal power overseas pledge, one year on. China Dialogue.

n.d. (2022). 20th National Congress of Communist Party of China opens in Beijing, Xi Jinping delivers report to Congress on behalf of 19th CPC Central
Committee. China’s Ministry of Foreign Affairs.

Share this:
 Facebook [https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/?share=facebook&nb=1]

 Twitter [https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/?share=twitter&nb=1]

https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/#:~:text=In September 2020%2… 3/4

5/18/23, 6:40 PM A Greener Belt and Road Initiative? China's Commitment to Sustainability | Chicago Policy Review

 LinkedIn [https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/?share=linkedin&nb=1]

 Email [https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/?share=email&nb=1]

Chicago Policy Review

© 2023. CHICAGO POLICY REVIEW.

https://chicagopolicyreview.org/2023/03/15/a-greener-belt-and-road-initiative-chinas-commitment-to-sustainability/#:~:text=In September 2020%2… 4/4