In early September 2019, the Center for Finance and Development, Tsinghua University in cooperation with Vivid Economics, and the Climate Works Foundation published a report on the environmental impact of the new Silk Roads and decarbonization. Following this report, world media presented the BRI as a threat to the environment. While Tsinghua researchers are finding that some BRI projects have an impact on global warming, their results are more positive and call on promoters of the new Silk Roads to focus their projects on a greener economy.
According to this study, the 126 states (excluding China) that are currently part of the “Belt and Road initiative” represent 28% of carbon emissions, but could emit nearly two-thirds of global emissions in 2050 if they follow the conventional development model (business as usual). In this case, global warming could reach 2.7 ° C by 2050, even if the rest of the world respected the Paris agreement on climate change
For the consortium’s researchers, in the current state of affairs, even if BRI participating countries adopted a cleaner development model, they could not fully achieve the objectives of the Paris agreement
However, it is not possible to deny developing countries access to a higher level of development. Lack of infrastructure is a glaring weakness in some BRI countries, and may be even more acute as these states become more urbanized. BRI or not, developing states will seek to equip themselves with better infrastructure for the prosperity of their own population. Contrary to what is presented in some media, it is not BRI itself that could increase global warming
For Tsinghua researchers, the BRI could even be an opportunity to develop greener growth on the condition that the environmental issue is taken into account in every “Belt and Road” projects
Actually, this report shows that the BRI could be a great tool for developing greener growth if innovative investments grow in the most carbon-intensive sectors such as energy, transport and construction. According to the report, the 17 key states of the BRI alone will require up to US$ 1 trillion of investment in clean energy by 2050. To finance these projects, the BRI states will have to look to private actors in green finance
Focus on green finance
Authors of the report call on BRI developing countries authorities to quickly implement their green finance strategy (many states in Asia have already launched green finance strategies, but these are not yet fully applied). For the authors, it is necessary that states set up verification bodies to regulate green finance, to avoid “green washing”
Tsinghua researchers are also calling on BRI states’ financial authorities to better coordinate their green finance policies to smooth trade, and expect BRI members to quickly develop specific green finance regulations.
They regret, however, that green finance products are not attractive enough for investors
The report also highlights the priority that must be given to the implementation of the Green Investment Principles for the Belt and Road Initiative developed in November 2018. Many Chinese and foreign banks are committed to respecting them, but other financial institutions must be invited to join this mechanism.
The authors also stress the need to raise awareness of green finance in BRI members states at the national level, but they also advocate for developing international cooperation in this area.
For Tsinghua’s team, it is necessary to create a platform for green finance for BRI states that could be implemented within the United Nations framework. Finally, this report suggests that China, which today sets some very strict criteria for its domestic market, respects the same criteria for all investment operations made in the BRI countries.
This study shows that it is urgent for the BRI states to respond to the environmental challenge and urges all BRI stakeholders to deepen their efforts for the development of green finance.
By rapidly deploying environmental regulations in all member countries, the BRI can help reduce climate change
China, a signatory to the Paris agreement on climate change, will undoubtedly take into account the recommendations formulated by the experts from Tsinghua and so keep its leadership in sustainable development.
This report is available online.