Promotion of the Green Belt and Road in Multilateralized Development
WANG Huiyao (China)
Green is the underlying color for the construction of the Belt and Road. The joint construction of the green Belt and Road is in line with the trend of low-carbon transformation of the world economy, and also an inevitable requirement for the implementation of the United Nations 2030 Sustainable Development Agenda and helping the world achieve “carbon neutrality”. According to data of the United Nations, if the world adheres to the development of low-carbon economy, gross world product (GWP) will be increased by 98 trillion US dollars by 2050, 2.4% higher than the benefits that can be brought under the current economic development pattern. In the following 30 years, not only will it save 8 times the cost of the investment in the field of public health and prevent a repeat of the crisis, but the number of jobs created by the renewable energy industry will quadruple to 42 million worldwide.
I. Multilateralized Development is the Key to the Development of the Belt and Road
Seen from the perspective of globalization, the Belt and Road Initiative is an active attempt of China to proactively provide international public goods, and both the design and the philosophy of the Initiative are multilateral. However, at present, the development of the Belt and Road is mainly based on bilateral relations between China and other countries, which takes the signing of memorandums of understanding as the main form of cooperation agreements, and the release of joint statements by governments of the two sides as a support. This has relatively weak binding force on both countries at the legal level. Besides, term of validity stipulated in the memorandums of understanding for the Belt and Road is relatively short, and the signing parties can withdrawal at any time, which have become potential instability factors for the Belt and Road cooperation to some extent.
Based on the experience of participating in Munich Security Conference and other international conferences in recent years as well as the bias and misunderstanding of Western public opinion on the Belt and Road Initiative, it can be said that promotion of the multilateralized development of the Belt and Road will help improve the transparency of rules for the Belt and Road, strengthen the trust of the international community in the Belt and Road, and strengthen the binding force of the rules for the Belt and Road, so as to promote the institutionalization, regulation, specialization, securitization, and sustainable development of the Belt and Road. Since 2013, the Belt and Road has undergone transformations from initiative to consensus, from vision to action, and from bilateral to multilateral. It has further promoted the multilateralized development of the Belt and Road Initiative, and realized standardized and open development in various aspects such as rule-making, personnel composition, organizational management, and project implementation, which can attract more countries to participate in the construction of the Belt and Road, expand the development space, and create more opportunities for global economic recovery and development.
Previously, Ministry of Ecology and Environment of the People's Republic of China and its Chinese and foreign partners jointly initiated the establishment of International Coalition for Green Development on the Belt and Road in 2019, and established a policy dialogue and communication platform, an environmental knowledge and information platform, and a green technology exchange and transfer platform for green development cooperation of the Belt and Road, which is of great significance to promote green development in the multilateralization of the Belt and Road. On this basis, in the face of the actual needs for green development of the Belt and Road in the aspects such as funds and standard rules, green finance international cooperation for the Belt and Road may accelerate the multilateralized and institutionalized development.
II. Huge and Urgent Need for Green Development of the Belt and Road
Infrastructure investment is a global need. According to the report of Global Infrastructure Outlook released by Global Infrastructure Hub (GIH) subordinated to the Group of 20 (G20), global infrastructure investment needs will increase to 94 trillion US dollars from 2016 to 2040, with an average annual growth rate of about 3.7 trillion US dollars. According to the latest research report of 2022 released by World Economic Forum, the international community needs to invest 66 trillion US dollars in global infrastructure for the emerging economies by 2030. Infrastructure is generally a project with large investment, long cycle and strong public welfare, and always has a huge funding gap. According to the report released by the G20, there will be an investment gap of 15 trillion US dollars in global infrastructure by 2040.
Meanwhile, facing severe climate crisis, the transformation and construction of green and low-carbon infrastructure has become an inevitable trend for the development of The Times. As clearly stated in the report of International Good Practice Principles for Sustainable Infrastructure released by United Nations Environment Programme (UNEP), the development of sustainable infrastructure is of vital importance to tackle climate changes, improve public services, and promote economic recovery after the COVID-19. In the coming decades, emerging markets and developing economies will face ever-increasing infrastructure and energy demands as they push ahead with industrialization and urbanization. According to estimates by World Bank, in order to cope with global climate change before 2030, an annual investment of 1.7 trillion US dollars will be needed for the Asian region in infrastructure construction and transformation.
Under the Paris Agreement signed at the end of 2015, the world's largest economies promised to control the range of temperature rise to be within 2℃, and various governments have set their intended nationally determined contributions. However, based on all available nationally determined contributions from all the 192 contracting parties, the United Nations expects that global greenhouse gas emissions in 2030 will increase significantly by about 16% compared with 2010. Unless the situation is changed quickly, it may lead to temperature to rise by about 2.7℃ by the end of this century. Today's infrastructure investment decisions will lock in the direction of emissions in the coming decades, and may determine the world's ability to achieve the goal set in the Paris Agreement that the global temperature rise should be controlled to be below 2℃. In this context, promotion of the green development of the Belt and Road and the strengthening of the construction of green infrastructure along the Belt and Road will help relevant countries and regions accelerate economic transformation and upgrading and move towards carbon neutrality.
III. Taking Asian Infrastructure Investment Bank (hereinafter referred to as “the AIIB”) as the lead to strengthen the green financial cooperation of the international development banks
Insufficient capital supply and difficulty in matching supply and demand are structural problems that have existed for many years in the field of international development finance. Improvement of the green finance system is an important guarantee for promotion of green development of the Belt and Road. Facing a huge investment gap, it is essential to integrate globally available financing channels. However, due to the strong externality, large investment scale, long cycle, and high ecological environment and geopolitical risks of some infrastructure construction projects along the Belt and Road, private capital will face larger risks and investment barriers compared with funds of international development banks.
The Opinions calls for strengthening green finance cooperation, and clearly states that the voluntary guidelines and best practices related to green investment and financing under multilateral cooperation frameworks such as the United Nations and the G20 should be promoted, and that capacity building in green finance should be facilitated. Loans from international financial institutions should be made good use of to leverage private green investment. Financial institutions should be encouraged to implement Green Investment Principles for the Belt and Road.
Since its establishment, the AIIB has made bold explorations in developing green finance, but it still faces challenges in the aspects such as insufficient funds, institutional voids and environmental issues. Jin Liqun, President of the AIIB previously stated that actual investment amount in green infrastructure of the AIIB was still far below the expected goal. Goal of the AIIB is that the cumulative financing for climate change mitigation will reach more than 50 billion US dollars by 2030, half of all new financing by 2030 will go to the private sector, and that private investors will also input resources into climate financing. Capital of the AIIB mainly comes from the capital of member countries. Compared with the huge funding gaps in international green infrastructure, energy and transportation and other construction, the AIIB itself has limited funds to invest in green finance. Meanwhile, in the face of the huge differences in the levels of development, ecological environment and awareness of sustainable development among countries along the Belt and Road, the AIIB faces great challenges in establishing uniform green standards, and its own experience is relatively insufficient.
In this regard, the AIIB may actively establish a multi-level green finance funding source system, build an international cooperation mechanism and dialogue platform of green finance, and promote the establishment of green finance implementation standards. At the current stage, the AIIB may take the lead to jointly build a global lending community for infrastructure projects dominated by international multilateral development banks, including World Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Islamic Development Bank, African Development Bank and Inter-American Development Bank, form an internationalized, standardized, open and transparent operation system of joint lending, contracting and tendering of international multilateral development banks, so as to mobilize the enthusiasm of various countries and multinational corporations around the world and implement extensive consultation, joint contribution and shared benefits. Moreover, as the overall capital reserves become richer and more resistant to risks, joint participation of international development banks may provide larger support for low-return, long-cycle and high-risk infrastructure projects in low- and middle-income countries, and constantly inject funds into infrastructure projects during the downturn of global economy, so as to boost global investment confidence and stimulate economic recovery. Meanwhile, the joint participation of multilateral development banks will also facilitate the investment of private capital in green infrastructure projects.
At the same time, when conditions are ripe in future, the AIIB may be upgraded to World Infrastructure Investment Bank, so as to better meet the financing and infrastructure construction needs of more countries, and better resolve the mismatching contradictions between “institutional discourse power” that developing countries should enjoy under international multilateral mechanisms and their contributions to world economy and the undertaking of responsibility of great nations.
(The author is President of Center for China and Globalization (CCG))