As the nefarious impacts of decades of energy strategies which relied on fossil fuels becomes more and more evident throughout Asia, new, cleaner and renewable energy sources are being sought throughout the region. China — a country that has been plagued by pollution perhaps more than any other — is now at the forefront of the renewable energy transition, and the Belt and Road Initiative (BRI) is serving as a conduit to export this expertise and technology throughout Asia.
According to the International Energy Agency (IEA), energy demand around the world is predicted to rise 30 percent by 2040, the transition to cleaner and renewable energy sources has evolved from a preference of an ecologically conscious societal fringe element to a global imperative from both environmental and economic perspectives. This is especially true for emerging markets along the Belt and Road, who are looking at future energy demands that are well above the global average — Southeast Asia, for instance, is expected to experience a 70 percent growth in energy demand over the next 25 years.
China, a country that has become known in recent years for its smoggy skies, has made fighting pollution a national priority. While 75 percent of the electricity in China is still coming from coal-fired power plants, this is a state of affairs that is changing fast. The construction of at least 85 new coal-fired power plants has already been cancelled and the development and proliferation of new renewable energy sources has rapidly been taking their place.
The results from this has been revolutionary, as China is now the global leader in solar, wind, and hydro energy capacity, investing more in renewable energy each year than the U.S. and EU combined. In 2017, China increased this commitment by pledging to invest an additional $360 billion in renewable energy prior to 2020, and, according to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), last year alone China pumped over $44 billion into increasing its renewable energy reach.
This model of renewables replacing coal is now being replicated throughout Asia. According to the IEEFA, 55 GW worth of new coal-fired power went online in 2016, while 165 GW of new energy capacity was renewables. The International Energy Agency (IEA) predicts that renewable energy will consist of roughly 60 percent of all additional energy capacity up to 2023.
China is also expanding its renewable energy transition overseas along the routes of the Belt and Road, and has already invested $32 billion in renewable energy projects abroad.
Chinese companies currently account for roughly 60 percent of the world's solar equipment production, and firms like Longi, Hareon Solar, Tongwei, JA Solar, and Jinko Solar are rapidly expanding overseas in conjunction with the BRI. Among other endeavors, Longi is currently setting up a 500 MW solar manufacturing operation in India, Hareon Solar has engaged in a joint venture in Morocco to install power plants and solar module production facilities, JA Solar boasts that it is currently shipping to over 92 countries, while Jinko Solar plans to corner 10 percent of the global solar manufacturing market.
However, while China is making considerable strides spreading renewable energy internationally, it must be stated here that the Belt and Road is also facilitating the spread of coal power. According to a 2017 report by the Global Environmental Institute, China is currently involved in 240 coal-fired power plants in 25 of the BRI's 65 countries.
"If you can develop these projects in a sustainable manner then that opens up access to new sources of funding that are available from many investors who are looking to support environmental friendly, sustainable developments," Noel Quinn, chief executive of commercial banking at HSBC, said.
This sentiment is being manifested on the ground throughout the various routes of the BRI, as multiple sources are being created to provide funding for renewable energy and other green projects.
While the Asian Infrastructure Investment Bank (AIIB) and the BRI are two separate initiatives, they do inevitably overlap at key junctions. Under the banner of "lean, clean, and green," a commitment to the Paris Agreement, and a pledge that they have no plans to invest in coal, the AIIB has been taking big strides to develop renewable energy projects throughout Asia; highlighted by hydropower projects in Pakistan and Tajikistan, a solar power plant in Egypt, and a coal replacement project in China that are already in the works.
Looking for new ways to mobilize private capital for green and other low-carbon development projects, China began issuing green bonds in 2015. Hardly a year later, China was the world's leader in this market, issuing an additional $36.2 billion of green bonds — a full 39 percent of the global share, according to the Climate Bonds Initiative. This strategy rolled over into 2017, with the Industrial and Commercial Bank of China (ICBC) issuing $2.1 billion worth of "One Belt One Road Green Climate Bonds" on the Luxembourg Green Exchange. China's green bonds are generating funds for initiatives aiming to develop and promote cleaner transportation, pollution control, conservation, recycling, and ecological protection, in addition to renewable energy.
"When companies are looking at BRI projects, one of the things they first think about is the implementation of that project in a sustainable manner, which is becoming a very important topic today," Quinn concluded. "So that's actually turning a potential problem to a positive, because … more and more financiers are really only interested in what is truly a sustainable project."