En­vi­ron­men­tal fi­nanc­ing on the right track

China Daily European Weekly - - Business - By CECILY LIU [email protected]­nadai­lyuk.com

Along the 750-kilo­me­ter line con­nect­ing land­locked Ethiopia with neigh­bor­ing Dji­bouti’s gi­ant port, an elec­tri­fied high-speed train whizzes past at 120 km/h, car­ry­ing thou­sands of tons of Ethiopian veg­eta­bles, cof­fee, tea, spices and oil seeds for ex­port.

This link, which has cut a three-day road jour­ney to 12 hours and re­duced freight costs con­sid­er­ably, is be­ing em­braced by Ethiopian traders and has been hailed as a big stride to­ward the coun­try’s am­bi­tion of be­com­ing Africa’s light man­u­fac­tur­ing hub by 2025.

But the line is also a story of suc­cess­ful green fi­nance.

Be­fore the line opened in Jan­uary, Ethiopian ex­porters mainly trans­ported their prod­ucts to the Port of Dji­bouti by road.

Ac­cord­ing to a study by Ethiopia’s Madda Wal­abu Univer­sity, the new link has re­duced en­ergy con­sump­tion by 75 per­cent and the car­bon foot­print by 85 per­cent com­pared with road trans­porta­tion.

The scale of car­bon re­duc­tion is no­table, con­sid­er­ing that 95 per­cent of Ethiopia’s ex­ports pass through the Port of Dji­bouti and can ben­e­fit from the rail­way.

Fund­ing for the line was pro­vided by loans from Chi­nese banks, in­clud­ing the Ex­port-Im­port Bank of China, China De­vel­op­ment Bank and In­dus- trial and Com­mer­cial Bank of China.

This fund­ing pro­vides a snapshot of a wider trend, in which Chi­nese banks and funds are look­ing for cli­mate­friendly en­ergy and in­fra­struc­ture projects to fi­nance along the trade routes in the Belt and Road Ini­tia­tive.

Pro­posed by Pres­i­dent Xi Jin­ping in 2013, the BRI ad­vo­cates im­proved con­nec­tiv­ity of in­fra­struc­ture, trade, ideas and knowl­edge along global trade routes.

The ini­tia­tive in­volves al­most 70 coun­tries and more than 4.8 bil­lion peo­ple. It cov­ers economies worth a com­bined $21 tril­lion (18.5 tril­lion eu­ros; £16.5 tril­lion), ac­count­ing for 62 per­cent of global GDP.

En­sur­ing the en­vi­ron­men­tal sus­tain­abil­ity of new BRI projects is a key com­mit­ment for China. At the 2017 Belt and Road Fo­rum for In­ter­na­tional Co­op­er­a­tion in Bei­jing, Xi pro­posed set­ting up an in­ter­na­tional coali­tion for green de­vel­op­ment in BRI ar­eas.

“We will pro­vide sup­port to re­lated coun­tries in adapt­ing to cli­mate change,” Xi said.

China is not alone on this jour­ney of green­ing the Belt and Road routes.

The United Nations signed an agree­ment with China to pro­mote sus­tain­able de­vel­op­ment of the BRI. The World Re­sources In­sti­tute has urged the coun­try to share its cli­mate mit­i­ga­tion ex­pe­ri­ences with other emerg­ing economies and help nations tak­ing part in the BRI to green their fi­nan­cial sys­tems.

The Univer­sity of Ox­ford in the United King­dom has launched the Green BRI Data and Anal­y­sis Plat­form to help BRI projects track their en­vi­ron­men­tal im­pact, while in­ter­na­tional com­men­ta­tors look to the BRI as a green fi­nance lab­o­ra­tory due to the sheer vol­ume of new projects.

Sean Kid­ney, CEO of the Cli­mate Bonds Ini­tia­tive, an in­ter­na­tional, in­vestor-fo­cused non­profit, says, “Chi­nese com­pa­nies with clean tech­nol­ogy should be en­cour­aged and fi­nan­cially sup­ported to ex­port their tech­nol­ogy to Belt and Road coun­tries, so that other emerg­ing economies will leapfrog to cleaner en­ergy solutions.”

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