New Special Policy Study Outlines Key Pathways for a Green and Low-carbon Belt and Road Initiative

By Cecilia Springer and Rebecca Ray

The pressing need for low-carbon energy transitions globally – and particularly in developing countries, which face significant financial and technical obstacles to energy transition goals– is now a global consensus. As a global network to support investment, finance and trade, with a particular focus on infrastructure development, China’s Belt and Road Initiative (BRI) has the potential to fill an important gap in supporting these transitions.

In 2021, China announced an end to its overseas coal investment and a shift to boosting renewable energy in developing countries through the BRI. Amid this landmark policy shift, Kevin P. Gallagher, Cecilia Springer and Rebecca Ray contributed to a new Special Policy Study (SPS) for the China Council on International Cooperation on Environment and Development (CCICED) on the topic of “Key Pathways on a Green and Low-Carbon BRI.” This is the third annual collaboration between the Boston University Global Development Policy Center (GDP Center) and CCICED, following previous reports on policies and practices to achieve a green BRI.

For the 2022 CCICED SPS, the GDP Center collaborated with experts in China’s Ministry of Ecology and Environment (MEE), BRI Green Development Institute, BRI International Green Development Coalition and other agencies to develop strategies for the BRI to support energy transitions around the world. The authors focused on three avenues for green BRI development: technical cooperation, financial cooperation and diplomatic cooperation.

Technical cooperation, raising capacity with industry and government stakeholders across all areas of BRI engagement, is a crucial starting point. As supply and demand of low-carbon energy generation is increasing worldwide, it is vital for China to identify the key needs and overall trends in BRI low-carbon energy development and leverage its own experience and expertise to step up cooperation in this area.

An innovative model to follow in this process is triangular cooperation, bringing together the financial and technical resources of China, high-income donor countries and multilateral bodies to train practitioners in BRI host countries. Drawing from case studies of China’s renewable energy technology promotion and cooperation in Ghana and Zambia, the SPS shows that this new cooperation model can benefit from long-term mechanisms and additional platforms for coordination. China can expand green and low-carbon-oriented partnerships based on the existing bilateral, multilateral, regional and international cooperation mechanisms.

Next, financial cooperation involves both expanding the base of investors and guiding those investors for the best possible outcomes. To “crowd in” new investors, the SPS explores several avenues, including expanding the support and guidance for public-private partnerships (PPPs), blended finance and green bond issuances. China’s coordination among government agencies, creditors and investors can enable greater incorporation of the PPP model for green and low-carbon development, and there are existing positive examples of deployment of this model for clean energy projects overseas.

New as well as traditional financial partners will need support in ensuring effectiveness and longevity of low-carbon energy investments by avoiding negative local environmental and social impacts. Even renewable energy generation facilities can have significant local environmental and social impacts on ecosystems and the communities who depend on them. For projects to find long-term success, they will need to appropriately assess and mitigate these risks. To guide investors – particularly new investors with less experience – the authors developed approaches to incorporate the “whole lifecycle” project governance approach highlighted in the 2021 “Green Development Guidelines” issued by MEE and the Ministry of Commerce (MOFCOM). The SPS explores ways to ensure appropriate environmental and social risk management through due diligence steps incorporated throughout project cycles: in preparation, design, implementation and completion.

Finally, diplomatic cooperation can help the BRI fulfil its potential as a platform for international collaboration to raise living standards sustainably across the world. By fully incorporating energy transition cooperation into the BRI, China can build on existing multilateral progress made through the Glasgow Climate Pact and the Kunming Declaration. However, energy transition remains a massive challenge for BRI countries, and deepened international cooperation needs to focus on resolving high-carbon industrial structure and its carbon lock-in effect.

To ensure member countries can overcome the barriers to decarbonization, the BRI must build on its history of multilateral and regional fora. China has led multiple multilateral cooperation platforms under the BRI framework and developed and improved policy and legislative systems to govern green BRI development. This cooperation must be deepened regionally, across sectors, for technology and market exchange, and through new and innovative platforms.

The need for green and low-carbon energy development is now a global imperative. China is well-poised to lead this development through the BRI. Given ongoing challenges and barriers, now is the time to minimize risks and maximize benefits for climate and development via green and low-carbon energy. Cooperation and innovative financial mechanisms between China and the world can form the basis of BRI green and low-carbon energy development.

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