Sustainability drive will colour the belt and road green over the next decade

From banning overseas coal projects and issuing green investment guidelines to reviving the ‘health silk road’, China is reorienting its ambitious infrastructure plan
This emphasis on green economic drivers will future-proof the Belt and Road Initiative and make it greener in its second decade

Chau Ee LeeandAshley Ang

Published: 1:30am, 10 Jun 2023

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Last month, Chinese President Xi Jinping and leaders from five Central Asian nations gathered in Xian for the inaugural China-Central Asia Summit, where they championed mutual aid and common development. Many of the summit outcomes depend on the success of the Belt and Road Initiative, in which Central Asia plays an integral role, given its strategic location.

Indeed, the grand infrastructure plan was announced in Kazakhstan in 2013. During the intervening 10 years, the world has seen a pandemic and increasingly felt the effects of climate change. Instead of stunting the progress of the initiative, these events seem to have acted as a catalyst or, at the very least, an opportunity for change in its second decade.

That change is being driven by a quest for sustainability, mirroring the green leap in global infrastructure projects. This might just spur a remodelling of belt and road projects by Chinese state-owned enterprises (SOEs), though it will require a tremendous pivot. Over 95 per cent of cross-border investments by Chinese SOEs in the energy sector between 2014 and 2017 were in fossil fuels.

By the end of 2016, China was involved in 240 coal projects in belt and road countries, an unsurprising number given its status as the world’s largest coal producer. This is no criticism – the belt and road’s emphasis on coal is born primarily from a convergence of the demand in developing countries, where fossil fuels are more affordable and dependable alternatives to renewables, and China’s surfeit capacity.

Yet, the latest signs regarding a belt and road reorientation have been positive. In an address to the United Nations General Assembly in September 2021, Xi pledged that China would not build new coal-fired power plants overseas.

Additional guidelines issued by China’s commerce and environment ministries in January 2022 called on private organisations and SOEs to apply international or Chinese environmental standards to overseas projects where the host nation proves remiss or insufficiently committed in that respect. Though merely guidelines, they represented a radical shift from the status quo and were a positive sign.

It is very likely that Chinese SOEs will seek to show support for Beijing’s objectives by “green-aligning” their belt and road projects to underscore their commitment to transitioning towards a lower-carbon global economy.

It is not yet clear if this will extend to adopting international standards that are being tightened in countries across the world to meet their declared environmental action plans and targets, such as the emissions-reduction commitments known as nationally determined contributions.

But given China submitted its 2030 climate pledge to the UN just before the commencement of the COP26 climate conference in November 2021, one can be hopeful.

Chinese SOEs will increasingly view belt and road projects through a different and updated lens, pushing to have them executed under a new, greener set of performance criteria. This will, in turn, enhance the projects’ quality, placing them firmly in line with the goals outlined in China’s 14th five-year plan. Such changes will effectively fulfil diverse policy goals for both the plan and the recast and modernised Belt and Road Initiative.

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When discussing the initiative and Covid-19 in the same breath, it would be a material oversight to fail to mention the pandemic’s role as the impetus for the re-emergence of the “health silk road”, famously broached in a 2020 phone call between Xi and Italy’s then-prime minister Giuseppe Conte.

A concept that first appeared in 2015 as part of the Chinese government’s planning for the belt and road, the health silk road’s impact on the role and approach of Chinese SOEs is likely to be significant in the long run in conjunction with the broader and more transformative focus on sustainability.

How China is climate-proofing the belt and road, starting with Pakistan

Whether China’s renewed and rather pronounced emphasis on the green economic drivers of the belt and road is a result of the pandemic or a coincidence is of no consequence. The important point is that China’s current initiatives are both prudent and contemporary, and thereby destined to future-proof the Belt and Road Initiative.

Stakeholders would do well to bear in mind the potential commercial and legal implications of the evolving or remodelled belt and road to navigate the changing landscape in a responsible and commercially astute manner.

Chau Ee Lee is a partner at UK law firm Addleshaw Goddard, where he leads its construction practice in Asia

Ashley Ang is an associate at UK law firm Addleshaw Goddard and works in the construction and engineering group

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