When John Kerry, US president Joe Biden’s climate envoy, returned from a whirlwind tour to Asia and Europe last weekend, he had some nuggets of good(ish) news. One was that the Chinese issued a joint statement with America about the seriousness of the climate crisis — paving the way for President Xi Jinping’s participation in this week’s climate summit.
Another was renewed conversations around India’s pledge to build 450 gigawatts of renewable energy capacity in the next decade. A third consisted of vague promises of future Chinese-US collaboration around green finance, in a bid to meet the Paris climate goals.
Was that last one just hot air? Perhaps. Most of the Biden administration is more focused on confrontation and competition with the Chinese government than collaboration. And while Xi has pledged to go carbon neutral by 2060, and China is the leading manufacturer of renewable energy products, almost 60 per cent of its energy consumption comes from coal.
Moreover, while Xi promised on Thursday to “phase down” coal usage, more coal-fired construction is slated in its latest five-year plan, adding to emissions. “The [Chinese] feel very strongly that they have some carbon space that is owed to them, since the rest of the world has been developing for a long time,” Kerry told the FT this week.
Worse still, in recent years China has financed some 240 coal-powered plants in Asia and Africa as part of its Belt and Road Initiative. Some calculations suggest these BRI countries could account for half of all carbon emissions by 2050.
This looks depressing. Yet the bold rhetoric in this week’s climate summit may also offer a seed of hope; or, at least, a spur for some creative thought. The Chinese government is unlikely to accept external hectoring about its domestic coal consumption, least of all from America. But there might be room for some US-China dialogue around the energy transition in the wider developing world, particularly if multilateral lenders engage in some clever financial footwork.
Take Pakistan, for example. Like every other developing country, it desperately needs more energy. Until recently, it was mostly achieving this with expensive oil imports and cheaper electricity from coal-fired plants, including those constructed with Chinese BRI loans.
But now it wants to switch: Nadeem Babar, Pakistan’s government energy adviser, recently told the FT that by 2025 some 50 per cent of its energy will come from renewables. “The targets are ambitious but we can do it,” he insists, noting that there is an economic incentive since hydroelectric and solar power costs less than imported oil in a sunny, mountainous place like Pakistan.
Hooray. But one big problem is that Pakistan cannot close its dirty coal plants because it owes China money for them (although it is currently contesting their terms). Nor can it easily finance the construction of renewables itself because it faces a pandemic-induced fiscal crunch. And while it hopes to attract private investors, it could be hard to do this at scale without public money to underwrite some of the risks.
Hence western leaders — and America — should think creatively. Beijing recently gave one tantalising hint that it is rethinking its BRI coal finance, by withdrawing from a coal project in Bangladesh. The proportion of BRI finance going to renewable energy has risen markedly too.
So it is not impossible to imagine a scenario where China might collaborate, formally or informally, if a consortium of multilateral or western lenders created a blended finance initiative for renewable energy use in Pakistan. It might even engage in some debt forgiveness for the coal loans if, say, Pakistan buys hefty quantities of Chinese-made solar panels or turbines. And if a pilot project like this could be made to work in Pakistan, it could be replicated in places such as Vietnam, Bangladesh and Indonesia.
Maybe this is just a pipe dream. One obstacle to this type of collaboration is the level of opacity around BRI loans, and China’s reluctance (until now) to forgive them. Another is that multilateral institutions and western lenders have been lamentably slow to implement blended finance projects at any scale. A third is that the Biden administration remains allergic to the idea of openly collaborating with projects that carry a “BRI” tag.
But if the world is going to tackle climate change, developing countries urgently need access to vast quantities of transition finance. This cannot easily be supplied from just one source, be that America, the World Bank, private banks — or anywhere else. And while the state of Chinese BRI lending is woefully unclear, there is increasing transparency around how coal usage is contributing to carbon emissions, thanks to innovative monitoring by non-governmental groups.
That might yet create enough embarrassment to bring people to the table. Indeed, this transparency has already prompted Japan to consider drawing back from emerging market coal finance in recent weeks. So the next time that Biden holds a climate summit, he should not just invite the biggest countries to participate but include those such as Pakistan too. It might yet offer a way to turn this week’s rhetoric into granular, collaborative progress.
gillian.tett@ft.com
Source: Economy - ft.com
