Will China Seize the Biggest Green Opportunity of the Coming Decade?

Last week I had the pleasure of reading a major new report from the World Resource Institute: “Will China Seize the Biggest Green Opportunity of the Coming Decade?”

The report examines in detail how much Chinese outbound investment is going towards fossil fuel reliant projects and compares this with the volumes being devoted to sustainable sources of energy.

Cheap Coal?

Financing coal fired power stations and oil refineries provides much needed energy for emerging economies. Coal is a cheap energy source as long as you don’t take into account the cost to the environment through greenhouse gas emissions or air borne pollutants which cause a multitude of serious health problems. If the you take those costs into account then suddenly coal becomes a very expensive fuel indeed.

The report made it clear that most Chinese backed projects have not focused on sustainable energy. For example over 2014 – 2017 61% of energy loans from the China Development Bank (CDB) were in fossil fuels related industries.

Nationally Determined Contributions

In order to help the world meet its climate goals greater priority needs to be given to green opportunities. Nearly every country in the world has signed up to nationally determined contributions (NDCs) which are a national roadmap aimed at reducing a nation’s greenhouse emissions.

In tandem with the NDC most countries also have a policy framework for scaling up sustainable energy sources which creates a stable pricing policy and perhaps subsidies for producing renewable energy.

In fairness the data in the report is historical and China’s focus on sustainablity is relatively new so the next decade could see a major shift towards climate finance in and out of China.

Sustainable Energy on the Belt and Road

Many sustainable energy projects have already been built by Chinese firms across the Belt and Road as my interactive map demonstrates.

Private Chinese firms have led the way in developing solar panel technology as well as building solar parks and wind turbines. In contrast state owned firms have historically at least been backing fossil fuel projects, suggesting that it is Chinese government policy that needs to change.

Chinese Policy Banks

Chinese policy banks have outspent their Western counterparts in many respects and have the financial firepower to help bridge the global gap in climate finance.

If Chinese firms can stop building fossil fuel projects it would also send a powerful signal that their time has passed. In sharp contrast multilateral development banks (MDBs) have led the way in providing clean energy finance. But I believe it’s now the turn of the Chinese policy banks EXIM and CDB to step up their efforts and catch up with the western led MDBs.

Now the challenge is for Chinese Banks and firms to back more renewable energy projects and help the Belt and Road Initiative towards their climate change goals.

Demand for Green Infrastructure

The demand and need for energy and infrastructure across BRI countries is immense. Running into trillions of dollars across the next decade. It is vital that this directed into low carbon transport and sustainable energy. China as one of the key providers of development finance across BRI and the rest of the world and so has a pivotal role to play. Continue backing fossil fuels and undermine the Paris Agreement or more hopefully back sustainable solutions and become a world leader in this field.

Now the cost of renewables has fallen dramatically their pricing can compete favourably with fossil fuels. The opportunities for Chinese firms to build and supply renewables are immense. A sample of 31 BRI countries showed that US$470 billion in new energy infrastructure spending is required to meet their renewable energy targets over the next decade.

As well as energy generation, low carbon transport systems are needed to reduce emissions and create liveable urban spaces. US$ 2.4 trillion in financing is the estimated need over the next 15 years. The BRI and by extension China can become the world leader in this field, but a major transformation is required to make this a reality.

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