Chinese Companies pledge to build projects under the Belt & Road Initiative has forced South Korean and Japanese financiers to maintain distance from the world’s biggest economy.
Due to its increasing sustainability concerns, China has announced the funding of more fossil fuel power projects in Southeast Asia.
According to the Asia Pacific Head of Projects Practice Group at Baker McKenzie Wong & Leow, Martin David, China will continue to maintain its stance until the host nations including Indonesia introduce good financial incentives and expanded power transmission to build up mass renewable energy projects possible.
The Belt & Road Initiative is a global development strategy taken up by the Chinese government. This project focuses on infrastructure development and investments in 152 countries in Asia, the Middle East, America and Africa.
Commenting on the execution of the recently made announcement, Martin said, “While Chinese officials have signalled a move towards more sustainable projects in BRI nations, I don’t see this materially changing Beijing’s [actual] funding of infrastructure projects [there].” He added that it will take some time for this decision to manifest into an obvious change.
Martin stated that various state-backed construction firms in China still want to build large fossil fuel projects as the contract preparation work involved in making a power project is the same in a US$40 million renewable project and a US$1 billion thermal power project.
Previously, in the Second Belt & Road Forum in April 2019, Chinese President Xi Jinping repeatedly emphasised his commitment to “open, clean and green development.”
He affirmed that all the infrastructure projects built under the Initiative should be green and sustainable. Special focus was laid on the need to make the project corruption-free and transparent.
According to the Head of Power and Environment, Social and Governance Research at CLSA, Charles Yonts, withdrawals from the host nations like Indonesia and Kenya may falter China’s ambition to make coal power plants in nations adhering to the Belt & Road Initiative.
As stated by Neil Johnson, the Managing Director of Macquarie Infrastructure and Real Assets, Multiple international financial institutions have implemented policies to restrict their exposure to coal power projects by stopping to finance them or subjecting them to specific review committees.
Those against China’s move to house more coal power plants deem it as a tool to project geopolitical power, eating overseas resources and assert surplus capacity of a slowing domestic economy.
Also, a new study that came out on Monday revealed China’s global investment plans could disrupt the 2C warming limit set by the Paris Agreement without constrains on pollution.
As per the five-year-plan of the Chinese government, China Electricity Council recommended adopting a ‘cap’ for coal power capacity by 2030. If this cap actualises the country’s capacity will increase by almost twice the size of Europe’s total capacity.