Greener road to the future

Lessons from China's overseas coal exit for better environmental cooperation for the next 10 years of the BRI

The reduction of environmental risks, such as climate change and biodiversity loss, is a challenge requiring global cooperation. The challenge cannot be overcome without active support from China, which is the world's largest emitter of greenhouse gases and is exhibiting high vulnerability of its biological diversity. Internationally, China's potential for green development through trade, finance, and investment — not least through its Belt and Road Initiative — is among the biggest in the world.

China achieved an important climate milestone in September 2021 when President Xi Jinping unilaterally announced that China will stop building new coal-fired power plants abroad. As China continues to support new domestic coal plants and hopes to peak domestic emissions before 2030, its overseas coal exit decision was not only welcome from a global climate perspective, but also surprised many international observers of the Belt and Road Initiative.

Indeed, building a green BRI that takes climate and biodiversity, as well as overall improved social development, into its core consideration, is challenging; it will also need continuous improvement and adjustments to different realities in the Belt and Road participating countries with varying degrees of development. So, how was the important decision of exiting overseas coal projects taken?

A new study published in the leading academic journal Science provides three main reasons.

First, it was supported by strong cooperation between Chinese and international partners, including the Belt and Road Initiative International Green Development Coalition and the China Council for International Cooperation on Environment and Development under the Ministry of Ecology and Environment. These coalitions work with Chinese and international partners to better develop, integrate and promote green development standards. In December 2020,10 months before the official coal exit plan was announced, the coalition supported the Green Development Guidance for Belt and Road projects that labeled coal-related projects as "red" or restricted. Following the publication of this "traffic light system", the coalition completed a special research report recommending a coal exit that "firmly underpinned the decision-making on China's overseas coal-related investments".

Second, a most important factor contributing to this exit decision was that several host countries of coal-fired power plants, many of which are involved in the Belt and Road Initiative, adjusted their energy plans. Rather than aiming to build more coal plants, these countries asked to work with China to emphasize green development through renewable energies. They had different reasons for this "change of heart". Economic considerations, such as the increasing price of coal in global commodity markets compared to decreasing cost of renewable energies, played an important role. There were also social reasons, such as public opinion opposing Kenya's 1.2 gigawatt Lamucoal-fired power plant, which had to be shelved after the Kenyan courts ruled that it violated environmental and social considerations.

Third, the study also finds that China is working within the multilateral system, particularly the United Nations, to announce its environmental ambitions. For example, both the targets to peak its emissions before 2030 and to become carbon neutral before 2060, as well as the coal exit decisions were announced at the United Nations General Assembly in 2020 and 2021, respectively.

Domestically, Chinese planners argue that coal will provide better energy security and energy independence. Additionally, many domestic stakeholders, such as financial institutions, enterprises and employers in coal mining and the operation of coal-fired plants, strongly depend on coal. In China, coal supports about 2 to 3 million workers, which makes a domestic coal exit and just transition more complex. Thus, domestically, China for the time being embarks on the dual strategy to expand support for both coal and renewables to provide electricity with a prospect of coal peaking within the next few years.

Thus, 10 years after the Belt and Road Initiative and for the next 10 years of pursuing the dream of a green BRI, the milestone of China's overseas coal exit also provides important lessons for future collaboration. Importantly, cooperation on greening the Belt and Road Initiative can be successful if Chinese domestic institutions are supportive and working with trusted international partners. This stands in contrast to a likely less successful interventions through external pressure on China to implement green development policies, for example from the G7 countries, without understanding Chinese needs: these foreign recommendations risk being perceived as trying to undermine China's development ambitions or as being hypocritical after many years of environmental pollution by the G7 countries.

International cooperation can also support host countries to accelerate demand for green over "red "projects. This can include financial support by Chinese and international partners to reduce the financing cost for green projects such as renewable energy or public transport. Another recommendation was to raise the costs for developers of environmentally harmful projects. Any cooperation requires continuous trust building, for example through research collaborations and cooperation in specific strategic growth areas, such as green finance. Finally, international partners can improve cooperation results by showing genuine interest for China's existing green successes and cooperate to learn from those Chinese green successes, for example in the expansion of high-speed rail or the widespread electrification of public transportation buses.

Some international organizations have already successfully implemented good cooperation strategies to work with China on international environmental outcomes such as building a green BRI. As the protection of global climate and biodiversity cannot succeed without China, more, not less, such cooperation for the Belt and Road Initiative and beyond seems necessary, particularly also in these challenging geopolitical times.

The author is an associate professor of practice in economics and the director of the Green Finance &Development Center at the Fanhai International School of Finance at Fudan University. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn