Climate Ranking for China’s Belt and Road May Limit Coal Plants

Coal-fired power plants and metal smelters would require more stringent supervision and face tougher financing under a plan to improve evaluation of the environmental and climate impact of projects in China’s Belt and Road Initiative.

A color-coded classification mechanism would help China’s government, financial institutions and companies to make better assessments on risks associated with investments overseas, according to a report released Tuesday by the Belt and Road Initiative International Green Development Coalition.

The coalition, supervised by China’s Ministry of Ecology and Environment, sees green projects including solar and wind farms, or other developments which support efforts to curb greenhouse gas emissions, as winning faster approvals. Yellow, or neutral, ranked investments which pose no significant environmental harm, would also win support and likely include waste-to-energy projects.

A red category covering developments with potential to cause irreversible environmental damage would include sectors including coal-fired power, hydropower, petrochemicals, mining and metals smelting, according to the report.

“The mechanism provides a practical tool that assists regulators and financial institutions in identifying projects and activities that help to scale up environmentally sustainable economic development,” said Xie Wenhong, a member of the coalition and among researchers who contributed to the report.

While the proposal was endorsed by the environment ministry, it’s unclear whether the system will be adopted by other government departments involved in approving overseas investments and projects such as the National Development and Reform Commission and the Ministry of Commerce.

Since China began its Belt and Road Initiative to expand trade links in 2013, more than 130 countries have signed deals or expressed interest in developments. At least $575 billion worth of projects have been built or are progressing, according to a 2018 estimate by the World Bank.

Some investments have been a focus of concern for local communities and international environmental organizations, including work to install new coal power in developing nations and hydropower developments that’ve been criticized over their ecological impacts.

China should draw up an exclusion list of global projects that shouldn’t win investment because of the potential for severe negative environmental impacts, the coalition said.

©2020 Bloomberg L.P.

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