The global green transition creates both opportunities and constraints for countries involved in the Belt and Road Initiative to grow their economies. Environmental and climate policies are becoming increasingly stringent in many countries due to an increase in ecological and environmental awareness. According to the OECD, the Environmental Policy Stringency of Belt and Road countries such as Turkiye, Indonesia and South Africa rose rapidly after the 1990s. This means that many developing countries involved in the Belt and Road Initiative face more stringent policy and regulatory constraints than advanced economies did in the early stages of their development.
There are two main forces behind the tightening of green constraints in Belt and Road countries. The first is increased international effort to address environmental problems such as climate change and biodiversity destruction. The second is increased public awareness of environmental protection in these countries.
There is an inverted U-shaped relationship between a country’s economic development and green environmental indicators, known as the Environmental Kuznets Curve described by classical environmental economics. According to the EKC, as a country’s per capita GDP grows, the level of environmental pollution first rises, then falls, a phenomenon sometimes described as “pollute first, clean up later”.
However, in this era of tightening green constraints, more and more economists have observed a flattening of the EKC in developing countries, meaning developing countries are responsible for less pollution and emissions despite being at the same level of development as developed countries. The flattening of the EKC implies a change in the relationship between the environment and development. The Belt and Road countries will not follow a path of greater pollution during their initial economic development, followed by an environmental cleanup as the economy advances. Instead, they will take a new green path of development which can be described as “cleaning up while developing”.
The main challenge of “cleaning up while developing” path, compared with the traditional “pollute first, clean up later” approach, is that the Belt and Road countries will face rising costs for technology, energy, capital and land. And it could lead to a slowdown in economic development.
Meanwhile, the green transition has already created new industries, such as renewable energy, electric vehicle and batteries, which are expected to be scaled up and become mainstream in the global economy. These new industries should create opportunities for Belt and Road countries to grow.
The history of economic development suggests that seizing the opportunities brought by global trends, allocating a country’s factors of production on a larger scale and participating in global production and division of labour are the key ways for developing countries to achieve economic development. The green transition is one of the most prominent development trends in the world today and this trend has accelerated in recent years thanks to the development of new energy industries and the implementation of national policies.
Although Belt and Road countries face rising costs because of the green constraints, the green transition also gives rise to new comparative advantages with resource endowments including new energy metals such as lithium, cobalt, nickel, platinum, copper and manganese, wind energy and solar energy, while global green industry chains allow the large labor forces of many Belt and Road countries to participate in global production. Therefore, the green transition can allow many Belt and Road countries’ emerging resources and large labor forces to participate more in global industry chains, and green industries may emerge as the new economic growth drivers.
China proposes that the Belt and Road Initiative should be green. The key to building a green Belt and Road Initiative is to help these countries maximize green benefits and minimize green costs.
China is able to leverage its own advantages to help Belt and Road countries seize opportunities for development related to participation in the green value chain. China could help the countries that are rich in new energy metal resources break the so-called resource curse, for example, through the construction of infrastructures such as roads and ports and the development of midstream and downstream manufacturing industries related to new energy metals. Relying on cost-effective photovoltaic products and globally competitive power equipment, China can achieve mutually beneficial cooperation with Belt and Road countries rich in solar and wind resources by offering investment in and construction of solar and wind power plants, as well as by trade in machinery and components.
Environmental costs can be reduced by strengthening environmental assessment, raising emission standards, improving people’s welfare, and enhancing environmental responsibility. China can encourage companies to actively reduce emissions and bear the cost by improving emission standards when implementing overseas projects, in order to minimize the damage to the local environment. In the guidelines for ecological and environmental protection of foreign investment cooperation and construction projects, jointly issued by the Ministry of Ecology and Environment and the Ministry of Commerce in 2022, it is explicitly stated that if the host country does not have relevant ecological and environmental policy standards or has low standard requirements, it is encouraged to adopt international practices or China’s stricter standards to better address the risks and challenges of green development under the Belt and Road Initiative. The government could also strengthen cooperation with Belt and Road countries in green technology, as well as green investment and financing, and reduce the transaction costs of domestic companies going global.
If we consider the principles of cost-benefit equivalence, the benefits of environmental governance in Belt and Road countries have global or regional attributes in terms of climate change, biodiversity conservation and transnational pollution control. Since the environmental benefits are shared globally, the governance costs should not solely be borne by the Belt and Road countries, but should be shared at the global level. For example, from a historical perspective, developed countries have accumulated much greater emissions and environmental damage than developing countries. The ecological conservation efforts of developing countries have a significant impact on global climate and environment. However, developed countries have so far failed to reasonably compensate for the environmental benefits.
Therefore, China could call for global actions for benefit compensation, actively participate in and lead the international environmental protection and sustainable development, and explore the establishment of an international environmental compensation mechanism, in order to strive for legitimate and reasonable development space for Belt and Road countries.
ourtesy: China Daily
