Greening Asian Power Investment along“ Belt and Road”

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The Paris Agreement, which came into force in 2016, sets a long-term goal of decarbonizing the global economy to protect vulnerable people from extreme weather and other weather-induced events. The “Belt and Road Initiative” aims to build a “green, intellectual, and peaceful” Silk Road, and proposes to strengthen green and low-carbon infrastructure construction and operation, with consideration on the impact of climate change in construction. Based on the international green investments in power sector, this paper identifies the potential risks and new opportunities facing China’s power investment in key Asian countries, while considering their national independent contributions and power development plans. It also provides reference and recommendations for Chinese policy makers and investors in developing power investment plans along “ Belt and Road” that are consistent with the 2°C temperature objectives of the Agreement.

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The “One Belt, One Road” initiative aims to promote inter-connectivity among all countries, especially those along the Belt and Road, in the areas of economy, trade, infrastructure, finance and culture to drive independent, balanced and sustainable development. The “Belt and Road Initiative” is to build a “green, healthy, intellectual and peaceful” Silk Road, and proposes to strengthen green and low-carbon infrastructure construction and operation with consideration given to climate change impacts in construction.  This is to highlight the importance of ecology in investment trade and promote cooperation in ecological environment, biodiversity and climate change that will contribute to build a green silk road. Most countries along the “Belt and Road” are developing countries with a weak economic foundation and a large financing gap in energy and transportation infrastructure. At the same time, a fragile ecological environment, low energy efficiency and high carbon intensity, as well as heavy air pollution in urban areas are also concerns for these countries. This also poses challenges to investment and capacity cooperation along “One Belt and One Road” and the construction of the Green Silk Road in terms of environmental protection, climate change and energy transformation.

Climate change is one of the most serious challenges facing all mankind. The Paris Agreement, which came into effect in 2016, is the latest result of the UN climate governance mechanism. The objectives of the Agreement include: controlling the global average temperature increase within 2 °C before industrialization, and striving to limit it to 1.5 °C; making the capital flow consistent with low-emission and climate-adapted development path. After the signing of the Agreement, more than 190 countries have developed and submitted their own National Independent Contribution Programs (NDCs). The plan clarifies the country's low carbon energy development plans and targets by 2025 and 2030, and 109 of them have proposed specific targets for increasing the proportion of renewable energy. The investment and financing activities of the power industry in various countries are crucial to meet their NDCs, channeling funds to climate-friendly areas and promoting economic decarbonization.

Therefore, considerations should be given to national short- and medium-term power planning at preliminary stages when making investment in the power sectors in Belt and Road countries, to avoid investment risks arising from changes in energy transformation targets in the host country. Also, to identify new opportunities for power investment. Asia is the fastest growing region for global energy consumption and carbon emissions in the future with electricity as major source of energy consumption. Six out of the ten countries that are mostly affected by climate change in the world are also located in Asia. In view of this, this chapter will identify the potential risks and new opportunities facing China's power investment in key Asian countries considering their national independent contributions and power development plans. It also provides reference and recommendations for Chinese policy makers and investors in developing power investment plans along “ Belt and Road” that are consistent with the 2°C temperature objectives of the Agreement.