In 2020, as most of the world’s economies have struggled with the impacts of the coronavirus pandemic, China’s investments into countries in the Belt and Road Initiative (BRI) have grown in value by 30 per cent, according to Ministry of Commerce statistics. Investments include transport, health, mining and more. In the five years since the initiative’s inception, one sector has remained steadfast in China’s ever-growing stream of outward investments: energy. With the energy sector central to the future of global emissions, these investments have also, however, raised concerns amid the global call for a green recovery. As the world wakes up to the urgent threats of climate change and biodiversity loss, China’s continuing support of coal power in its belt and road project portfolio is being put under ever more scrutiny. According to Boston University’s China’s Global Power Database, Chinese invested in 23.4 gigawatts worth of coal power plant capacity in overseas markets from 2002 to 2017, accounting for 30 per cent of total investment in overseas power plants. With Japanese and Korean financial institutions and policymakers increasingly placing restrictions on overseas coal investments, China is fast becoming the world’s final major coal power developer. Such an unenviable label goes against President Xi Jinping’s bold pledge for China to realise carbon neutrality by 2060 , which has triggered a flurry of decarbonisation plans and climate pledges, as well as his repeated calls for the belt and road to be coloured green. With this week’s release of the classification mechanism for belt and road projects, overseas coal projects are now in the “red” category for Chinese belt and road investors. Our team is composed of more than 20 researchers and advisers in the BRI International Green Development Coalition, an initiative launched by China’s Ministry of Environment and Ecology at the second Belt and Road Forum in 2019. It has set out red, yellow and green categorisations for belt and road projects based on their environmental impact. The categorisation considers three major elements: pollution control, climate change mitigation and biodiversity conservation. Coal-related projects are a clear-cut red, the type that cause significant, irreversible environmental damage and have major negative environmental impacts. These projects therefore require stricter supervision and regulation. Projects such as wind and solar power, green ports and reforestation, on the other hand, receive a green light because of their positive or negligible negative environmental impacts. Green projects should be encouraged, the classification mechanism notes. The mechanism we outline in the report should be used for concerted efforts to pursue greener overseas investment among different BRI regulators and ministries. Since the belt and road’s inception, Chinese government bodies’ management of risks associated with projects has been scattered and mostly not focused on the pressing issue of environmental risk. In 2017, for example, the State Council set out “encouraged categories” for outbound investment, but their focus did not include environmental risks. This October, the environment ministry, together with four other ministries and regulators, jointly issued a guidance document promoting the integration of climate investment into overseas projects. Going forward, ministries, BRI governing bodies and finance bodies will need to collaborate and agree on the standards and categories so that climate and environmental aspects can be strengthened. One major step in this direction would be to use the project classification mechanism. It would allow policymakers to draw up a negative list of project types based on their environmental risk profile. Many global regulators and financial institutions already provide exclusion lists of environmentally harmful projects. As of 2020, almost 120 private and public financial institutions from 26 countries have agreed to exclude fossil fuel from their investments. Japan announced in July it would tighten the funding criteria for foreign coal-fired power plants, and the Asian Infrastructure Investment Bank has published an in-depth exclusion list of projects with environmental considerations. The classification mechanism published this week will hopefully lead to such a list coming from China. That would help better align belt and road projects with broader, key international environmental practices and China’s pledges, including the UN Sustainable Development Goals, the Paris Agreement on climate and the Aichi targets on biodiversity. The classification of these energy projects also comes at a time when the global trend away from “red” coal and towards “green” renewables is becoming increasingly clear, not least in several BRI participant countries. This year has seen Bangladesh, the Philippines and Vietnam, previously three of the biggest coal power markets in the world, shift the direction of their power sector development plans away from coal . Pakistan set a target last year for wind, solar, biomass and small-scale hydro power generation capacity to reach 30 per cent of total capacity by 2030. The energy transition is already well under way across the region, paving the way for a more transparent and systematic approach to managing belt and road projects’ climate and environmental risks. The BRI projects classification system could be the beginning of many steps to address the concerns of China’s overseas presence on coal and other projects with high environmental risks. It will lay the foundation for an energy transition and a green, sustainable development model in places outside China. Wang Ye is research analyst with the World Resources Institute. Christoph Nedopil Wang is founding director of the Green Belt and Road Initiative Centre of the Central University of Finance and Economics. They are both leading authors of the report “Green Development Guidance for BRI Projects Baseline Study” and experts to the BRI International Green Development Coalition of the Chinese Ministry of Ecology and Environment