Is China serious about curbing pollution along the belt and road?

Earl Carr and Yan Chen say the world, including the US and Japan, is watching Beijing’s unprecedented investment project, wondering whether it will follow through on climate-friendly targets and begin cutting back on materials that contribute to pollution, such as cement

PUBLISHED : Monday, 11 December, 2017, 4:16pm
UPDATED : Monday, 11 December, 2017, 4:24pm

Last month, US President Donald Trump wrapped up a 12-day Asia trip, which included meetings with Chinese President Xi Jinping, who has made the “Belt and Road Initiative” the centrepiece of his domestic and foreign policy agenda. The initiative is the largest infrastructure and development strategy the world has ever seen.

To put things in perspective, it involves almost 70 countries connecting Europe, the Middle East, Africa and Asia. It will receive support from the Asian Infrastructure Investment Bank (AIIB) worth US$100 billion, the New Silk Road Fund for US$40 billion and US$900 billion from the China Development Bank.

If realised, it will cover about 65 per cent of the world’s population, about one-third of the world’s GDP and about a quarter of all the goods and services the world moves. Achieving this will be a monumental objective for Xi, who recently saw the belt and road enshrined in the Communist Party’s newly revised constitution.

However, within this strategy lies a critical opportunity for China to make unprecedented investments in green technology, which has significant implications for US multinational corporations, the region and the world.

How China and Asia can lead the fight against global warming along the belt and road

In 2017, Beijing announced that it aims to spend US$360 billion in renewable energy by 2020. However, being further able to make sustained investments in wind, solar and related technologies throughout the regions covering the belt and road is important for several reasons. First, symbolically, it sends a clear message that China is not just paying lip service to sustainability but is genuinely intent on playing a leading role in combating climate change. When Trump announced in June that the United States would withdraw from the Paris agreement, the US in effect ceded its global leadership.

During the 19th party congress last month, Xi stated that China had taken the “driver’s seat in international cooperation to respond to climate change”. Second, it allows China to compete more effectively with countries like the US and Japan to raise the bar in developing more advanced renewable energy technologies. This promotes healthy competition and, in some cases, the opportunity to share technology. General Electric and China’s Silk Road Fund set up a trade initiative plan to jointly establish an energy infrastructure investment platform allowing the two to jointly invest in electric power grids, new energy and oil and gas in countries and regions along the belt and road.

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One of the by-products of Trump’s visit to Asia and his “America first” campaign is that it has required Asian countries such as Japan and China to focus more on cooperation. Japanese Prime Minister Shinzo Abe and Xi met on the sidelines of Apec and discussed the importance of economic integration and cooperation within the framework of the belt and road. Abe stated that “Japan is ready to extend cooperation with China’s Belt and Road Initiative”.

This represented a dramatic shift in Japanese policy, which since 2014 had staunchly opposed both the AIIB and belt and road. Japan has a lot to offer in terms of efficient green technology. Being able to share and, in some cases, jointly develop technology can have significant implications for how infrastructure is built.

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The initiative is often viewed as a model for China to fuel domestic growth by supporting excess capacity in steel and other commodities. To put things in perspective, Hebei province in northern China by itself produces more steel than all of the US combined. Building and constructing roads and airports throughout Central, East and Southeast Asia is a core objective of the initiative, but very little attention has been paid to how to prevent carbon dioxide gains from sustainable energy sources from being negated by the carbon dioxide produced in making concrete.

Experts estimate that cement production accounts for more than 6 per cent of all carbon dioxide emissions, a major factor in global warming. China is the second-largest cement producer in the world and one of the largest consumers of cement globally. There have been a number of efforts focused on reducing carbon dioxide emissions from concrete, primarily through the use of lower amounts of cement and higher amounts of supplementary materials such as fly ash, blast furnace slag, and the like.

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It is critically important to reduce carbon dioxide emissions through the greater use of such materials and China can play a pivotal role in supporting this effort, as it is one of the countries that stands to gain the most environmentally and economically through such initiatives. Nearly one-third of deaths annually in China can be attributed to air pollution. Moreover, air pollution alone costs China about 6.5 per cent of its GDP, resulting from lost productivity in factories forced to shut down during bad air days so that people don’t breathe the toxic air.

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China wants to be recognised as a global power championing issues like climate change. In June, Beijing convened a high-level meeting of energy ministers, bringing together countries from across the globe for a discussion on how to deploy clean energy. “I didn’t come to Washington, I came to Beijing,” said California governor Jerry Brown after announcing a joint clean-energy effort with the Chinese leadership. During the Barack Obama administration, climate change became the defining issue of cooperation between the US and Beijing in the face of more contentious issues like the South China Sea.

Many in China and abroad are still very sceptical of Beijing’s long-term commitment to clean energy and sustainability. Adopting institutional reforms, coupled with collaborating with multinational conglomerates to more comprehensively utilise green technology in the “Belt and Road Initiative”, would demonstrate a real commitment if China desires to be respected as a responsible global power.

Earl Carr is a managing director at Momentum Advisors, a New York based SEC-registered international wealth management firm. Ms Yan Chen is a senior consultant at Momentum Advisors