Intro
The "One Belt One Road" is a development initiative put forward by the Chinese government in 2013. It refers to the New Silk Road Economic Belt and the 21st Century Maritime Silk Road, serving more as a roadmap for China to further integrate itself into the world economy and strengthen its influence in the regions it covers. (See more at China's Overseas Investment and Sustainable Development under the "One Belt One Road" Strategy) Energy and infrastructure are the focus in China’s extensive cooperation with “One Belt One Road” countries, which plays a key role in meeting its huge demand for energy and achieving prosperity. However, many countries related to “One Belt One Road” are developing countries faced with serious ecological challenges resulting from the old development mode. For example, the Arab Countries that stretch across the North Africa and the West Asia is arid, with its forest coverage lower than the world average.
As the hub of Islamic culture, Arab Countries are playing a significant role in the world due to their critical geopolitical position, abundant oil reserve and distinct history and culture. Few investors, however, are able to gain a deep understanding of the market due to different cultural backgrounds. It’s encouraging that China has enhanced its investment in this area. For example, the Sino-Arab bilateral trade volume in 2014 has increased by 5.2 per cent compared to that of 2013, which covers energy, transportation, chemicals and real estate, etc. However, Chinese investment in Arab Countries is mostly directed to oil. What we should keep in mind is that just like China, Arab Countries are facing environmental issues due to their extensive growth mode. According to the World Bank, fossil fuel energy consumption accounts for over 88 per cent of the total energy use in Arab Countries, except for Sudan. And per capita carbon emission in countries such as Qatar and Saudi Arabia are far higher than the world’s average level, which has generated huge pressure for energy saving and emission reducation as well as environmental protection.
This alert will provide a brief summary of China’s investment towards Arab Countries, the environmental laws and regulations of Arab Countries, and the Intended Nationally Determined Contributions (INDCs) submitted by these countries. If integrating environmental friendly and climate proof principles into the trade and investing under the “One Belt One Road” initiative, China would play an active role in helping this region to meet their climate targets, and achieve a low carbon energy transition.
Key Point 
China has become the second largest trading partner of the Arab World, with remarkable increase over the last decade. The Sino-Arab bilateral trade volume in 2014 has increased by 5.2 per cent compared to that of 2013, reaching $251.2 billion. China’s export to this region reached $113.9 billion, increasing by 12.3 per cent compared to that of 2013, which mainly covered mechanical& electrical goods, textile clothing, high-tech products, daily hardware, etc, while its import from this area mainly included crude oil and petrochemical products. China’s Outward FDI Stock has surpassed $10 billion by the end of 2014, covering resource exploitation, household appliance installation, light industry, and clothes manufacture, etc. The accumulative outsourcing contracts volume between Chinese enterprises and Arab counterparts has reached $255.1 billion by the end of 2014. The projects lie in various sectors such as housing, communication, transportation, petroleum, chemicals, electricity, port, and building materials, etc. Countries such as Algeria, Saudi Arabia, UAE and Sudan constitute the essential outsourcing market of China in this region.
China put forward enhanced cooperation with Arab countries on sectors like economic& trade, electricity, energy, communication, railway infrastructure, medical and health services, etc. China also wants to reinforce cooperation with Arab states in both traditional sectors like energy, trade and infrastructure and emerging sectors like nuclear energy, space planning and new energy.
Arab Countries stretch across the North Africa and the West Asia, whose geographical terrains are mainly arid desert and plateau, with a vulnerable ecosystem and forest coverage lower than the world average. Figures from the World Bank show that countries with its forest coverage over 10 per cent in Arab Countries are Lebanon, Morocco and Somalia, while other Arab countries only have two per cent of forest coverage. Middle East has attracted large number of companies to develop oil here due to its rich oil reserve. Nevertheless, it should be noted that just like China, Arab Countries are facing environmental issues due to their extensive growth mode. According to the World Bank, fossil fuel energy consumption accounts for over 88 per cent of the total energy use in Arab countries, except for Sudan. And average per capita carbon emission of these countries, estimated by the World Bank, reached 4.7 metric tons per capita, approximately equivalent to the world average of 4.8 metric tons per capita. CO2 emissions in countries such as Qatar, Saudi Arabia, Bahrain, Kuwait, UAE are far higher than the world’s average level, which has generated huge pressure for energy saving and emission reduction as well as environmental protection.
To invest in Arab countries which have frequent ethnical issues, religious conflicts and complex social situations, investors must have an adequate understanding of the local markets, laws and regulations, secondly abide by related laws and safeguards, fully respect local customs and traditions in order to avoid any conflict. This means Chinese companies also ought to know the laws and regulations related to environmental protection and social situations of Arab countries inside out, to reduce the investing risks caused by environment and social issues.
Compared to those of Europe and Latin America, the environmental laws and regulations of Arab countries are relatively loose and have much space for details and specifics. Of the 18 countires, Iraq Sudan and Oman don’t have details about EIA. As for the rest of these countries, more kinds of environmental laws and regulations can be found on related websites of Egypt, UAE, Qatar and Bahrain, with more specific and scientific classification. UAE has released the most detailed standards and regulations about environmental-protection related sectors, while Qatar attaches greater importance to EIA.
As big oil exporters, Arab countries have been faced with huge pressure for energy saving and emission reduction as well as environmental protection. As UNFCCC Conference of the Parties (COP21) in December 2015 in Paris approaches, some Arab governments have submitted their national climate plans intended nationally determined contributions (INDCs), to reduce emissions and address climate change . Arab countries that have submitted their INDCs to the UNFCCC are Morocco, Oman, Tunisia, Lebanon, Djibouti, Mauritania, Jordan, UAE, and Algeria, among which, Morocco was the first Arab countries to submit its own INDC.
The Moroccan INDC encompasses two economy-wide targets covering CO2, CH4, and N2O: One unconditional target and another based on support provided by richer countries to unlock the country‘s maximum ambition.
• Unconditional target: By investing around $10 billon into greening its economy, Morocco will cut its greenhouse gas (GHG) emissions including land use, land use change and forestry (LULUCF) unconditionally by 13% below the Business as Usual (BAU) scenario by 2030 from 2010 levels;
• Conditional target: If Morocco receives $35 billion by 2030 for financial, technical and capacity-building support through climate finance mechanisms and if a new legally-binding agreement is struck in Paris, the country would increase its target up to 32% below BAU by 2030; Due to its acute vulnerability to climate change, Morocco‘s INDC also includes a climate adaptation component which will be complemented by the development of a National Adaptation Plan (NAP). This plan will focus on decreasing the vulnerability of the country‘s largely agrarian population and better coordinating the envisioned actions.
• Adaptation target: Morocco seeks to continue its efforts to increase the resilience of key infrastructures, vulnerable populations and fragile ecosystems, especially in the mountain, oases and coastal areas, by devoting at least 15% of its overall investment expenditures to adaptation actions. These will include measures, such as, integrated water resource management and artificial refill of aquifers, anti-desertification measures, protection of cultural heritage, and conversion of grain crop areas to fruit plantations.
Morocco’s INDC features economy-wide emission reduction targets and timeframes. In order to achieve the targets set in the INDC, the country has indicated which additional mitigation actions it will implement. The unconditional target is based on the implementation of 10 actions, while the conditional target assumes 54 actions across the country‘s main economic sectors over the period 2010–2030.Particularly remarkable is the special focus on the energy sector, in which the country aims to achieve the greatest share of its emission reductions for both targets, namely through: a) the extension of the national solar and wind programs in order to increase the installed capacity significantly to more than 50% by 2025, b) reducing energy consumption in buildings, transport and industry by 15% by 2030, and c) phasing out of fossil fuel subsidies.
All these actions are rooted in national priorities and policies making them part of a coherent sustainable development strategy. The most prominent policies are: the National Strategy for Sustainable Development (NSSD), the National Strategy to Combat Global Warming (NSGW), the Green Morocco Plan (GMP), the Green Investment Plan (GIP) and the Moroccan Solar Plan (MSP). Detailing what can be achieved with and without international support sends a clear signal to private investors and makes access to international climate finances (i.e. GCF) more likely.
What is remarkable is that though no emission peak year has been mentioned in the Moroccan INDC, the emission trend illustrated in both targets appears to sharply decline after 2029. This suggests an emission peak and a decoupling of Morocco‘s GHG emissions from economic growth and an effective transition towards a green economy at the end of the INDC period.
China will implement the concept of “going green” of overseas investment if China could seize the opportunity lying in the emerging demand for climate finance of the hosting countries when investing in energy and infrastructure in the region. That involves not only robust end-of-the-pipe treatment to reduce projects’ negative impact on the local envvironment, but also well-functional incentive mechanisms that could reallocate resources by means of green finance and taxation services when making investment decisions, so as to drive more investment into green industries and strictly restrict investing in high pollution projects.
Alert
- Energy, Economy, Environment and Sustainable Development in the Middle East and North Africa
- AIIB Promotes “One Belt One Road” Strategy on Energy Cooperation
- Ma Jun: Green Investing to One Belt One Road Should be Highlighted
- Morocco's INDC – A strong signal coming from the first Arab country
View
Abbās Varij Kāzemi & Xiangming Chen China and the Middle East: More Than Oil:"Once we factor in the non-oil related Chinese economic activities, China’s regional footprint becomes deeply visible and of significant importance. It also looks remarkably similar to the large and layered scope of China’s economic influence in other regions where China has moved beyond energy and commodities into other sectors such as urban and transport infrastructure. It is in the Middle East, however, that China’s growing role is tangled up with some country-specific geopolitical threads that are normally absent elsewhere."
Karim Elgendy Carboun: Sustainable Development and the Built Environment in the Middle East: “Challenges and OpportunitiesAt the urban scale, sustainable development faces the lack of an urban development framework in most of the region’s cities and the general lack of an encouraging regulatory environment that could stimulate a market change towards sustainable development.……At the individual building scale, sustainable development faces different — but equally difficult — challenges, Chief among which is the region’s hot and arid climate……Since the building forms that have shaped the cities of the Middle East in recent decades were mostly imported, they were not environmentally responsive to the region’s climatic conditions and relied on energy-intensive air conditioning to remain cool enough for human occupation……Another challenge that faces sustainable development at the building scale is the region’s construction industry. ”
Resource
- Statistics: 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment for Arab Countries(CH)- Summaried by Greenovation Hub
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Material: Briefing on the Environmental Laws and Regulations of Arab Countries(CH)-summaried by Greenovation Hub
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Report: Investing Index of Arab Countries(CH)— China-Arab States Expo
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Report: China in the Middle East – Georgetown Security Studies
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Report: Foreign Direct Investment from China: Sense and Sensibility –American Bar Institution
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Case Study: China-Middle East Energy Relations –Brookings Institution
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Statistics: China Global Investment Tracker-American Enterprise Institute
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Report: Arab Food, Water and the Big Gulf Landgrab that Wasn’t –Princeton University
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Background Information: Key Areas of Cooperation in China-Arab States Expo 2015(CH)-- China-Arab States Expo
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Meeting Brochure: 2015 China-Arab States Expo Key Investment Promotion Project(CH)- China-Arab States Expo
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