Renewable power has for the first time made up the bulk of China’s Belt and Road Initiative energy investments as the coronavirus pandemic accelerated a shift away from fossil fuels, new analysis showed.
The share of wind, solar and hydropower made up 57 per cent, or about $11bn, of China’s total investment in energy infrastructure in 2020, up from 38 per cent in 2019, according to research from the International Institute of Green Finance at the Central University of Finance and Economics in Beijing seen by the Financial Times.
But the institute, which analysed a database maintained by the American Enterprise Institute combined with other sources, also found that coal investments took up a larger portion of China’s $20bn total of energy investments, up from 15 per cent in 2018 to 27 per cent last year.
The green milestone was reached as Chinese foreign direct investment under the BRI continued to fall from its peak in 2015. Last year, according to IIGF’s analysis, Chinese investment to BRI countries declined faster than the expected decline in global flows into emerging economies, dropping 54 per cent year-on-year to $47bn.
Christoph Nedopil Wang, director of IIGF’s Green Belt and Road Initiative Center, attributed the shift to renewables to a realisation from Chinese investors and host countries that carbon-intensive energy production carried both financial and environmental risks. “Yet, appetite for fossil fuel investments remains . . . [because of] a variety of reasons, such as a belief in the need for coal as a ‘cheap’ source of energy or due to locally available coal reserves,” Mr Nedopil Wang said.
The large role of hydropower in China’s energy investments further complicates questions of sustainability. Dams produce energy without emitting carbon dioxide, but they often flood forests and other ecosystems that suck up carbon. The pandemic has strengthened a desire in developing economies to rely instead on wind and solar power. A number of countries critical to the BRI, including Egypt, Pakistan, Bangladesh and Vietnam, are drawing up plans to ensure their economic recoveries are environmentally friendly.
A pledge by Xi Jinping, China’s president, to ensure China’s carbon dioxide emissions peak before 2030 and reach net-zero emissions by 2060 has revived hopes that Beijing will play a big role in achieving Paris climate agreement goals.
At home, China’s investment in power production is a similar mix of rapidly expanding renewable energy and an intransigent reliance on coal power.
China said it installed 120 gigawatts of wind and solar power in 2020, more than double the year before and nearly four times the UK’s installed capacity. At the same time, China approved more new coal power plants in the first half of 2020 than any year since 2015.