Last week leaders from around the world gathered in Beijing to discuss the future of China’s sprawling Belt and Road Initiative (BRI). The BRI’s mix of mystery and ambition make it a Rorschach test for evaluating international development trends and China’s international position.
It is at once a vague umbrella covering dissimilar development projects that may have occurred anyway, and the most ambitious infrastructure program since the end of World War II, if not ever which seeks nothing less than to connect the world.
Such ambition, regardless of the lens used, has inescapable environmental consequences. Road and rail will be built to connect people and markets, with impacts on biodiversity and ecological services that vary vastly across different projects.
Chinese investment will lock in decades of coal pollution, create complex environmental trade offs in the hydro sector, and amplify renewable energy deployment all at the same time. Shifting flows of goods will both open up more efficient consumption options and create new opportunities for resource plunder and environmental decline.
Such multi pronged impacts did not start with the BRI. Aid and investment from Western countries, development finance institutions, and the Asian first-movers in Japan and South Korea have also funded fossil fuel development, and struggled to conduct and act upon effective environmental impact assessments. BRI architects have the opportunity to do better, but must fundamentally alter their approach to do so.
While China espouses green principles for BRI projects, host government policies regulate their execution. Deliberations on site selection, consultation, social impact, displacement, and long-term impacts like air pollution from coal plants have little in common across the BRI. The effective enforcement of existing policies likewise varies, revealing the BRI as a strategic initiative that may have some continuity in its geo-economic objectives, but little in its operations.
China does not apologise for this. The BRI is a series of interlinked economic deals that are expected to follow the laws of the land where they take place; nothing more, nothing less. While this position is in line with China’s fondness for transactional relationships and lionisation of national sovereignty, it will not yield sustainable outcomes.
The first reason concerns problems of scale and jurisdiction. Much of the infrastructure China is planning and building through the BRI has cascading risk potential. Hydropower projects have downstream impacts; air pollution moves with the wind; road and rail disrupt nutrient and flora/fauna flows in ways that have unforeseen consequences.
These indirect risks and outcomes are difficult to capture through purely project-based environmental assessments, particularly given their tendency to span jurisdictions. Local governments are not tasked, nor are they set to be, with managing the downstream impacts of projects they are vetting. Even when overseen or undertaken by national governments, environmental risk often ignores or under-emphasises impacts that do not stop at the border.
The second reason China’s wholesale dependence on local regulations leads to poor environmental outcomes is accountability. Evidence shows that when financiers have strong standards but poor enforcement relationships with local governments, environmental performance suffers.
When local governments are active but receive few incentives for robust environmental and social performance from financiers, environmental performance suffers. It is when financier standards converge with local government follow-through that performance improves.
This makes sense: financiers are more likely to have access to leading-edge environmental assessment tools, the personnel to develop and deploy them, and the desire that projects across their portfolios meet certain standards. Local governments are suited to stakeholder engagement and granular environmental inputs through their knowledge of local conditions and their interest in positive ongoing relationships with their constituents.
For the BRI, such synergy must start with China, which has an opportunity to deploy more concrete principles. Rather than oblique and aspirational statements about a sustainable BRI, which already exist, these principles could craft caps on coal development which currently dwarf other BRI energy investments and create nuanced site selection processes for transportation infrastructure that accounts for ecosystem services.
Such principles would not “green” the BRI. Certain projects would continue to suffer from poor local capacity, enforcement deficits for policies covering investors and recipients, and the powerful interests that drive unsustainable outcomes for short-term gain. Addressing these issues is part of development finance writ large. But strengthening and specifying China’s strategic environmental principles along the BRI is a vital step. It is also in China’s interest.
The goal of the BRI is to create and extend markets while broadening and deepening China’s geopolitical reach. Coal fire power production may yield industrial & manufacturing gains in the short term, but long-term health and environmental management impacts make it a poor bet for fostering robust trading partners.
Road and rail that compromise vital watersheds may link markets more quickly, but at the expense of wider rural and urban prospects moving forward. China understands these realities at home, and has the opportunity to apply its lessons learned abroad.
Which brings us back to Beijing last week. President Xi Jinping continued familiar rhetoric in his comments that the BRI “aims to promote green development.” Minister of Ecology and Environment Li Ganjie signalled his group’s ambition to impact BRI practices by convening a Thematic Forum on the Green Silk Road.
Twenty-seven investment players, including all major Chinese banks involved in the BRI, signed up to Green Investment Principles at the Financial Connectivity Forum organised by China’s central bank and Ministry of Finance.
These are important steps, but their ability to tangibly affect BRI investment remains uncertain, and they stop short of uniting BRI projects through clear environmental principles and strategies. Whether they ultimately find success is among the most important swing factors for the development future of dozens of countries and billions of people.