China will host a trillion‐dollar investment summit this weekend amid rising concerns that its funding of overseas coal projects could swamp efforts to keep global warming to less than 1.5C.
The Belt and Road forum, which opens on Friday in Beijing, has been billed by climate campaigners as a pivotal moment that will determine whether China uses its vast financial weight to nudge the world towards renewable energy or continues to promote expansion by its fossil fuel companies.
In recent years Chinese banks have become the lenders of last resort for coal projects in south Asia, Africa and the Balkans that the World Bank and other international institutes have refused to fund because this dirtiest of fuels is the primary source of carbon emissions from electricity generation.
Although China has won kudos for trying to clean up its environment by cutting dependence on coal, its companies are making up for lost business at home by expanding overseas. Most of their funding comes from the Belt and Road Initiative (BRI).
The strategy will be reviewed at the Second Belt and Road Forum for International Cooperation, which will run until 27 April and will be attended by the UN secretary general, António Guterres, the International Monetary Fund head, Christine Lagarde, and 37 heads of state.
Although it is not billed by organisers as a climate event, this may prove to be the most important event of the year for global emissions, such is the scale of proposed investments in energy, roads, railways, dams and ports.
China says the BRI, which was launched by the president, Xi Jinping, in 2013, accelerates development in many of the world’s poorest countries and builds trade routes that benefit the global economy.
Critics say it is a tool to project geopolitical power, suck up overseas resources and vent the excess capacity of a slowing domestic economy, particularly in the steel, construction and power industries. From an environmental perspective, the primary concern is that Beijing is exporting a highly polluting model of growth.
The promised splurge on infrastructure dwarfs anything the world has seen before. Morgan Stanley predicts BRI investment will rise above $1tn over the next decade. The initiative already covers 124 countries that together account for two‐thirds of the world’s population and a third of global GDP.
The forum will review the progress so far and set the direction for the next five years, with a central focus on the “quality” of projects. For climate campaigners, this is seen as the best opportunity to date to reduce emissions.
Coal is likely to be at the centre of the debate. China’s banks have earmarked $36bn for 102 gigawatts of coal‐fired capacity in 23 countries, according to the Institute for Energy Economics and Financial Analysis. Last year two‐fifths of the country’s overseas investment was reportedly spent on this dirty energy.
The biggest recipient, with $7bn, is Bangladesh, where China is vying for influence with Japan, South Korea and India. All four countries are building thermal plants in Bangladesh. Last year China Huadian Hongkong Company Limited signed a deal with a local partner to build a 1,320-megawatt plant at Moheshkhali island.
In Africa, there are projects in Malawi and South Africa. Mohamed Adow, from Christian Aid, said China’s projects were locking the continent into out‐of‐date technology. “It is deeply unfair for China to get Africa hooked on fossil fuels and debt when it comes to building Africa’s infrastructure while China is starting to adopt clean, cheap, technologies of the 21st century,” he said.
The government in Pakistan has embraced the opportunity to make up shortages in energy supply. At the opening last week of a 660MW coal power station in Tharparkar – supported by China Machinery Engineering Corporation – officials declared the new facility to be “the pride of Pakistan”, but the plant will make the country dependent on a new open‐cast coalmine that will produce 3.8m tonnes of low‐quality fuel each year. Climate campaigners said this was a missed opportunity because the surrounding Sindh province had rich potential for renewables, with wind corridors and abundant sunlight.
In Europe, China is financing, building or equipping 4.1GW of coal‐fired plants, according to the Danish NGO VedvarendeEnergi (Sustainable Energy), including the Kostolac B3 power station in Serbia and the Tuzla 7 plant in Bosnia, which are subject to investigations, lawsuits or petitions from environmental groups.
Wawa Wang, a senior adviser to VedvarendeEnergi, said the forum should address the double standards between China’s domestic climate actions and its overseas actions. “I’d like to see China introduce binding policy and law that restrict financing of overseas coal projects,” she said.
Xi has declared that the BRI should be green. But the balance so far has been towards black energy. A coalition of 10 Chinese NGOs have petitioned the government to change tack, as have reports by Chatham House and research institutes in the US. Pressure is also likely to come from the growing number of international partners involved in other BRI projects, including the World Bank, the Asian Development Bank, the Inter‐American Development Bank and the UK government.
But it is the host nation that is providing the vast majority of funds, which means decisions will rest with Chinese bankers, Chinese officials and, most of all, the Chinese president.
First published by The Guardian, 25 April 2019