Greening the Belt and Road with Four Underlying Mechanisms

With five years to go before the Sustainable Development Goals (SDGs) deadline, official statements have stressed that only 18 percent of the targets are on track, and many are going in reverse. International development community and policymakers around the world are struggling to find approaches that help to combat climate change and other challenges.

Chinese government has increasingly integrated green development principles into the framework of the Belt and Road Initiative (BRI). In 2017, the Ministry of Environmental Protection, the Ministry of Foreign Affairs, the National Development and Reform Commission and the Ministry of Commerce of China jointly issued two key policies aimed at “greening the BRI.”

A new working paper by Xiaolin Wang, Ran Jin and Yan Wang examines China’s multifaceted approach to supporting green transformation in countries along the Belt and Road and investigates its impact and underlying mechanisms. The authors argue that China’s green transformation is not simply about increasing environmental protection investment but systematically changing the factor endowment structure, investment structure and employment structure of the national economy.

Main findings:

• Using data from 139 countries between 2013 and 2022, the analysis reveals a significant decrease in carbon emissions intensity among countries along the Belt and Road.
  • Further analysis suggests that the intensity of China’s outward foreign direct investment (OFDI) may partially offset the carbon reduction effects of the initiative.
• Generally, the impact of BRI varies across countries, depending on their development levels and political contexts.
  • The initiative significantly influences both low- and high-income nations. Low-income countries inherently produce fewer carbon emissions, while high-income countries, having completed industrialization, can gradually address environmental pollution and combat climate change.
• The efficacy of carbon reduction varies depending on the economic development stage and the institutional capacity of partner countries.
  • In nations characterized by high government efficiency and strong rule of law, the impact of the Green BRI is more significant.
• Multidimensional mechanisms such as the dissemination of low-carbon energy technologies, digital innovation, trade in digital services and industrial upgrading play crucial roles in facilitating the green transformation process in countries along the Belt and Road.

As the largest trading partner and the largest manufacturing exporting country at its advanced stage in green technology and FinTech, China has the capacity and technological know-how to support countries along the Belt and Road through all-encompassing approaches. China is adapting to impacts and criticisms in domestic policies and in the international development arena. This self-correcting process may provide policy learning experiences for other countries.

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