Working towards becoming one of the global leaders in renewable energy development, China reiterated aggressive renewable energy goals in its 13th Five-Year Plan, with a target fuel mix featuring less than 60% coal by 2020. China has made clear that it wants to export its expertise in the renewable sector, both to provide an outlet for its companies and also to be a leader in environmental stewardship. Various multilateral development banks (MDBs) are increasingly carrying the torch for renewable energy projects under the BRI.
The New Development Bank has committed two-thirds of its financing over the next five years to sustainable infrastructure development, and recently announced that it aims to expand lending from $2.5B in 2017 to $4B in 2018. In its first round of loans in April of 2016, the NDB issued $811MM in green energy loans. And its most recent loans, from September of 2017, featured $800MM for three green development projects in China’s Fujian, Hunan and Jiangxi provinces.
Meanwhile the Asian Infrastructure Investment Bank (AIIB), which has environmental stewardship as a central part of its project review framework, has announced around twenty energy-sector investments made to date, including a $210MM portfolio of solar projects in Egypt. The AIIB has also announced a hydro projects in Tajikistan, Pakistan, and potentially Georgia.
MDBs are not the only drivers of renewable projects. The China-Pakistan Economic Corridor (CPEC) has seen the announcement of various utility-scale wind farm projects as well as the Quaid-e-Azam Solar Power Park. CPEC also has a slate of major hydro projects planned.
But overall, Sam Geall of the University of Sussex and Associate Fellow at Chatham House notes that the MDB’s projects will be a strong signal for the future of renewables due to their multilateral stakeholders. “How these banks are spending money, as opposed to the China Ex-Im Bank or China Development Bank, sends out signals on how the BRI is viewed by member countries.” If these banks can continue to show “how projects and environmental goals get deployed compatibly,” as Geall says, then China will be well on its way to meeting its BRI sustainability goals.
Helen Wong, HSBC’s chief executive for Greater China, sees limiting the impact of climate change while building and financing the infrastructure to enable sustainable growth as two of the world’s biggest challenges.
“China recognizes that climate change is a global problem and is emerging as a leader in international efforts to meet the goals of the Paris Agreement. Policymakers also understand that, if the 65-plus countries along the Belt and Road build the same kind of infrastructure that China has in the past, we will not be able to meet the 2 degrees Celsius target. China is at the forefront of renewables technology globally as it makes its own transition to a lower-carbon economy and I would expect that to be extended along the Belt and Road.”
Chief China Economist, HSBC Private capital is essential to fund this huge trading network