By Michael Lelyveld
As China’s massive Belt and Road Initiative (BRI) spreads to countries around the world, energy analysts say the government has been ducking responsibility for the environmental effects.
President Xi Jinping’s signature trade infrastructure and development policy launched in 2013 has grown dramatically in the past five years. Starting with construction projects and plans in 64 countries, BRI now lists 125 nations, according to the China Global Investment Tracker published by the American Enterprise Institute.
The nearly U.S. $1-trillion (6.7-trillion yuan) program has expanded China’s economic and political influence as well as its environmental footprint with energy-consuming projects stretching from Asia to Africa and South America.
Yet, China seems to have taken little responsibility for the ecological impacts in foreign countries where it has financed development.
Environmental experts and BRI critics have cited a high proportion of coal-fired power plants and other projects requiring high-polluting resources and construction materials.
A paper last year for Duke University’s Center for International and Global Studies, for example, highlighted the prominent role of coal in developing the China-Pakistan Economic Corridor (CPEC).
The Pakistan development is a primary objective and a showcase for the BRI program, supported by 22 BRI projects valued at over U.S. $26 billion (176 billion yuan), according to the paper. China’s total financial commitment to CPEC has been estimated at U.S. $63 billion (427 billion yuan).
“Currently, coal-fired plants constitute half of announced CPEC energy generation projects and 69 percent of capacity, throwing doubt on the environmentally friendly rhetoric surrounding the BRI initiative,” said the study. Wind and solar power account for only 10 percent of the added capacity, it said.
Analysts have catalogued numerous official guidelines, policy statements and regulations governing the overseas activities of BRI contractors and the state banks that finance them.
Energy policies lie with host countries
But none has served to restrain the growth of China’s polluting projects abroad, according to a recent policy brief by experts at the Energy Studies Institute of the National University of Singapore (NUS).
“Despite this plethora of documents and initiatives, there seems to be no agency within China that is responsible for ensuring that enterprises follow the relevant guidelines and penalizing those that do not,” said NUS energy experts Philip Andrews-Speed and Yao Lixia.
“Indeed, the central government struggles even to document the growing number of BRI projects,” said the brief, titled “Who Is Responsible for Greening the Belt and Road Initiative?”
The analysts pointed to 14 coal-fired BRI power projects in Indonesia with combined generating capacity of six gigawatts, noting that all of the smaller units under 600 megawatts are conventional “sub-critical” power plants that use fuel less efficiently. Such projects have locked the country into higher emissions for decades to come, they said.
The primary responsibility for setting energy policies and approving high-polluting projects lies with the host countries. But their governments may be driven by development pressures and lured by contracts with Chinese state-owned enterprises (SOEs) and energy companies backed by state banks, the policy brief said.
Similar criticisms were voiced last year by Kelly Sims Gallagher, a Tufts University professor of energy and environmental policy, in a Financial Times op-ed.
BRI “is the biggest vehicle for foreign direct investment in the world, but it is presently locking in outdated, dirty, and inefficient technologies in recipient countries rather than preparing them for sustainable prosperity in a carbon-constrained world,” Gallagher wrote.
China’s proliferation of coal-fired power plants abroad also predates BRI. From 2001 to 2016, China’s banks had financed over 50 coal plants, producing nearly 600 million metric tons of carbon dioxide annually, said Gallagher. Over half of the generators were sub-critical plants.
‘More difficult for poor countries’
Other surveys have recorded even higher totals.
According to the Global Environment Institute, China has supported 240 coal power projects with 251 gigawatts of capacity in 65 BRI countries in the 15-year period to 2016, chinadialogue.net said.
“These new coal plants will make it much more difficult for poor countries to meet their climate goals under the Paris Agreement,” a report in January by chinadialogue.net editor Isabel Hilton said.
Another study released in January by the Ohio-based Institute for Energy Economics and Financial Analysis (IEEFA) found that China is funding over one-fourth of all the coal-fired power plants under development outside the country.
The study estimated that China has committed or proposed U.S. $35.9 billion (244.4 billion yuan) of funding for current coal power projects in 27 countries, citing data from the Global Coal Plant Tracker at endcoal.org. Twenty-three percent of the projects are sub-critical plants, it said.
An endcoal.org report last March said that “Chinese financial institutions are the world’s largest funder of overseas coal plants, … funding at least 16 percent of all coal-fired power stations under development outside China.”
A detailed Tufts study co-authored by Gallagher last year found numerous Chinese government guidelines and regulations for BRI projects, including rules that all must have environmental impact assessments. Investments over U.S. $2 billion (13.5 billion yuan) must be approved by the cabinet-level State Council.
But none of the rules seem to have stopped BRI from spreading pollution.
“In examining these policies, it is important to clearly state upfront that, as of early 2018, no formal law regulating environmental protection in China’s overseas investments existed,” said the Tufts study.
“So far, no companies have been publicly reported to be punished due
to environmental problems related to overseas investments,” it said.
‘Relatively weak adaptive capacity’
China’s promotion of coal-fired and other environmentally damaging projects abroad stands in contrast to its push for more sustainable energy sources at home.
The regulatory lapses of BRI share some common themes with the shortcomings of domestic energy policy implementation, cited in a recent book co-authored by Andrews-Speed and Sufang Zhang of North China Electric Power University.
The book, titled “China as a Global Clean Energy Champion: Lifting the Veil,” highlights the gap between the country’s available political, financial and human capital resources supporting energy reforms and “the relatively weak adaptive capacity of China’s governance institutions.”
In practice, the rigidity of government and party structures has led to traditional administrative measures and less reliance on market forces.
“Whilst this approach has yielded substantial benefits to China in terms of the manufacturing, export and domestic deployment of renewable energy equipment, it has been a hugely inefficient use of resources in terms of allocation of funds, curtailment of renewable capacity and industrial overcapacity,” the book said.
The authors blamed the institutional environment for giving local governments and SOEs the opportunity to undermine energy reforms by blocking the dispatch of wind power to the grid, for example, while building more coal-fired power plants.
Andrews-Speed sees the BRI environmental impact as the result of a familiar problem with China’s government institutions.
“I think the problem is the standard one of lack of government capacity to transfer policy rhetoric into structures and systems for implementation. There are other more important policy priorities, notably within China,” he said by email.
“Both policy banks and commercial banks have environmental criteria for their loans. Even if they do enforce them rigorously, this is probably done at project level, not at program or country level,” Andrews-Speed said.
Opening the door
In BRI countries, coal-fired plants may be seen as opening the door for industrial parks and other energy-consuming projects.
In Bangladesh, for example, construction is underway on a U.S. $1.65-billion (11.1- billion yuan) coal-fired plant at the port of Payra under a contract with China National Machinery Import & Export Corp. (CMC), to be opened in December.
Preparatory work has started on a U.S. $4.4-billion (29.8-billion) rail line from Dhaka to Jessore, and a project for the country’s first underwater tunnel is also in the preparatory phase, Nikkei Asian Review reported last year.
In January, the official Xinhua news agency said that state-owned giant PowerChina had signed an agreement to build another coal-fired plant in Bangladesh’s Dinajpur district, adding to two previous coal power projects and a joint venture for a Dhaka elevated expressway.
In all, Chinese support has been cited in at least 16 of the 49 coal power projects that have been planned, built or listed in various stages of development in Bangladesh by the Global Coal Plant Tracker.
Despite growing concerns in BRI countries about affordability and debt, some officials have seen such projects as a good strategy at a time when China’s domestic economic growth is slowing.
“China has overcapacity onshore and it’s not growing as fast as it did in the past, so it would require external demand to support its production,” Naser Ezaz Bijoy, CEO of Standard Chartered Bangladesh told Nikkei last March. “Countries like Bangladesh growing at seven percent will have that demand.”