Environmental financing on the right track
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.”