The U.S. has recently signaled that it is ready to respond to the economic and geopolitical threats posed by China’s Belt & Road Initiative (BRI), a trillion-dollar global infrastructure investment program.
China is now the largest global lender for infrastructure, exceeding all of the major multilateral development banks put together. President Joe Biden suggested to UK Prime Minister Boris Johnson that “we should have … a similar initiative, pulling from the democratic states, helping those communities around the world that … need help.”
To be truly successful, however, this effort would need to not simply match China’s Belt & Road it would need to offer a better product.
Enter the Blue Dot Network. Under the Trump administration, the U.S. joined forces with Japan and Australia to develop a network that would certify “quality infrastructure investments” to ensure that projects are environmentally and socially sustainable, inclusive, transparent, economically viable and financially and legally compliant.
A sustainable infrastructure certification (Blue Dot) was proposed in order to address a real need: To date there is no single, globally accepted standard for sustainable infrastructure investments.
Without such guardrails, governments and companies will continue to construct highways that destroy sensitive ecosystems, dams that require massive and unnecessary community resettlements, as well as coal plants with outdated technology that increase greenhouse gas emissions.
The Blue Dot Network, though based on a worthy concept, was barely implemented and it remains only a vague initiative on the U.S. State Department’s website.
Reinvigorating the Blue Dot Network and establishing sustainable infrastructure certification standards is just what the U.S. needs to compete with China’s BRI. A US-led global infrastructure Investment program that requires all projects to be Blue Dot-certified could be a game changer, not only in its competition with China, but also for the Biden administration’s effort to create green jobs at home and build alliances abroad.
It is conceivable that China would be forced to respond by raising its standards to match the Blue Dot which would be a big win for the global environment.
Requiring Blue Dot certification to qualify for funding would distinguish the U.S.-led infrastructure initiative from Chinese BRI projects. China has aspired to market its infrastructure program as a “Green” Belt & Road but, to date, its environmental and climate guidelines for lending have remained voluntary and ill-defined. As a consequence, an enormous gap remains between the Green BRI’s aspirations and its on-the-ground implementation.
Many Western critics have noted that some BRI infrastructure projects create social and environmental damage far exceeding their economic benefits. Others have warned that some BRI loans create debt traps for vulnerable nations, requiring defaulting nations to surrender their sovereignty over infrastructure or natural resources.
Climate advocates have voiced frustration over China’s loans for coal power plants banned by all major multilateral development banks and other lenders due to their damage to the global climate.
Despite these criticisms of BRI, few alternatives for infrastructure loans have been available to developing nations. Chinese companies have been able to operate with lax standards in many countries because BRI projects address enormous unmet needs for energy, transportation, water and telecommunications infrastructure even if they come at an environmental, social and financial cost. Blue Dot-certified infrastructure loans could offer attractive alternative options.
Blue Dot certification could also help boost the Biden administration’s American Jobs Plan. A key element of this proposal is the creation of new green jobs at home in renewable energy, sustainable transportation, green fuels and retrofitting technologies.
As China’s BRI has already demonstrated, foreign development loans can open up new markets for exporting emerging green and digital technologies and goods. Providing financing for hundreds of Blue Dot-certified projects around the world would create a robust market for American-made clean technologies and opportunities for American companies specializing in building clean infrastructure.
To be successful, the Blue Dot Network would need to expand beyond its three current members and invitee India. If the Blue Dot Network were able to convene and coordinate the multitude of international institutions currently trying to promote quality and sustainable infrastructure the G20, multilateral development banks, OECD, UN and NGO and private sector partners the Blue Dot could become the gold standard.
At that point, traditional allies and infrastructure lenders such as the European Union and South Korea, already deeply committed to green growth principles, would be logical country partners.
Creation of a Blue Dot Network by many of China’s biggest rivals could pressure China into responding to these new standards. Indeed, adhering to Blue Dot standards might help resolve some of the problems that have plagued the Belt & Road. A couple years ago China quietly began pulling back its new infrastructure investments in response to the growing global criticism of their unsustainable project loans and to weed out risky and unprofitable infrastructure projects.
With the Chinese economy heating up, its overseas infrastructure investments are poised to rebound. This could be the moment for China to pivot to a true Green BRI. If the Blue Dot Network were to offer an attractive portfolio of sustainable infrastructure loans to help developing countries transition to green economies, China might find it convenient to develop its own Green BRI certification to compete (a Green Dot?).
If the U.S. and China were to try to enhance their economic position and soft power via sustainable infrastructure lending, this could be a rare instance where competition between the two would be good for both countries, good for developing nations and good for the planet’s climate.