Greening the Belt and Road in the Post-Megaproject Era
Introduction
Green development has become a prominent feature that defines the next stage of Belt and Road Initiative (BRI) development. In the past three years, the Chinese government has launched a series of policies and guidelines for overseas green investment in an effort to align with international standards and to reduce emissions. However, Asia’s carbon emissions still rank among the highest regional global carbon emissions. One prominent challenge facing BRI green transition is how to navigate post-megaproject development. A post-megaproject green transition for the BRI is not just a matter of reducing future development finance and project sizes, but also about managing the long-lasting impacts of existing megaprojects and envisioning a new project pipeline for a green transition.
From a Megaproject Fad to “Small is Beautiful”
Infrastructure connectivity and industrial capacity cooperation lies at the heart of BRI development. In recent decades, infrastructure-led development has risen in prominence in China’s overseas economic engagement and South-South cooperation. In particular, megaprojects —large-scale, complex ventures that cost over $1 billion, involve multiple public and private stakeholders and bring potential transformational impact on millions of people—have been deemed particularly significant under China's overseas finance scheme and BRI cooperation framework. According to Chinese overseas investment data from China Global Investment Tracker, between 2005 and 2022, megaprojects account for 18% of the total number of BRI projects and 56% of BRI total investment.
Megaprojects were a favored development option for both host countries and China in the initial stage of BRI development. For a host country, these projects are often the largest infrastructure investment made in the country in decades or even a century, leaving a lasting hallmark of national development. For China, these projects come with debt financing from China’s two major policy banks, the Export-Import Bank and the China Development Bank, and introduced Chinese materials, equipment, industrial standards, corporate culture, and even legal and regulatory frameworks to host countries.
Despite its earlier popularity, enthusiasm for megaprojects is drying up for budgetary, environmental, political, and economic reasons. For one thing, these projects face growing scrutiny regarding their socio-environmental impacts, leading financiers to be increasingly cautious in supporting such projects. Host country governments’ budgets for infrastructure development is also quickly drying up when faced with growing external debt. As these projects transition from the construction phase to the operation phase, the visible economic benefits such as job creation and population influx give way to politics that emerge as these projects redistribute benefits across interest groups.
As a result of these concerns, the BRI has taken a “small is beautiful” approach in the post-megaproject era. According to Boston University Global Development Policy Center’s Chinese Overseas Development Finance (CODF) Database, the number of loan commitments significantly rose between 2013-2015, and peaked in 2016, with a general downward trend since. Development finance supporting the BRI shrank in project size, monetary value, and geographic footprint from 2013-2017 to 2018-2021, with the average loan commitment amount between falling from $534 million to $378 million, the average length of linear projects from 238 km to 157 km, and the average size of area-based projects from 90 km2 to 16 km2; the geographic footprint of projects supported by Chinese development finance have also become less likely to overlap with sensitive territories, including critical habitats, Indigenous peoples’ lands or national protected areas.
Managing Project Impacts in Post-Megaproject Development
The post-megaproject development phase of BRI is not just a matter of reducing future development finance and project sizes, but also a matter of how to manage existing megaprojects that will have a long-lasting technological, socioeconomic, and environmental impact. Attending to these impacts will require that BRI development projects:
Fully internalize green technologies. The post-megaproject BRI can benefit from thorough reflection on its technological implications for host countries. Chinese investments into power, transportation, and other long-lasting infrastructure assets will lock in technologies for decades and will affect the development pathways of BRI countries and their neighbors. Making sure that host countries fully absorb and internalize the new and greener technologies introduced is key to project sustainability and decarbonized development in the long run.
Adopt longitudinal tracking mechanisms and a more systemic approach to technology transfer. Many Chinese companies have developed on-the-job training and occupational education programs to support technology transfer programs during project construction and the initial stage of project operation. The issue is whether host countries can truly independently maintain and operate such new technology-powered infrastructure once international support is completely withdrawn. To fully integrate a project into a host country requires a systemic endeavor that cultivates human resources, institutional support, bureaucratic know-how, market demand, and popular buy-in, which could take decades. Host countries, China, and other actors will need to take concrete steps in addressing these bottlenecks. Tracking host country progress in technological absorption and integration is also critical for understanding barriers in technology transfer. To date, appropriate mechanisms for tracking technological progress and barriers have not yet been conceptualized.
Take a more proactive approach in addressing the spillover of socio-economic impacts. In BRI project development, the actors involved have adopted a “trial and error” approach that improved their practice by reacting to the challenges that emerge on the ground. While such an approach demonstrates the highly adaptive nature of China’s overseas development model, it tends to overlook some unintended socio-economic dynamics that will have long-term environmental implications. For example, one unexpected outcome as a result of megaproject development in Kenya was an increase in sand mining for construction purposes, and such mining activity has the potential to cause detrimental outcomes for neighboring communities when coupled with more frequent flooding amid climate challenges.
Attend to unintended consequences by incorporating “deep uncertainty” into decision support. The actors involved in project development have become increasingly aware of the importance of tracking project outcomes and incorporating project feedback into future project development. The recently introduced grievance mechanisms, green standards, and upgraded ex-poste evaluation efforts by Chinese entities demonstrate their dedication to improving BRI project performance. What remains to be strengthened is foresight on potential unintended consequences and emergency response to potential crisis. BRI outcomes depend on future changes in the system that are hard to predict as well as opposing preferences of stakeholders that are difficult to balance. This situation may be conceptualized as “deep uncertainty” in long-term decision making. Policymakers will benefit from incorporating deep uncertainty in BRI development. At the project level, it means that participating countries and a wide array of stakeholders need to be truly involved in assessing the feasibility and risks of specific projects, rather than treating stakeholder consultation as a “tick the box” exercise. For example, before project construction, one-on-one interviews with community residents can be organized to gain better understanding of the local risks and to complement community consultation meetings that may have an echo-chamber effect.
Refine BRI environmental policy through case-based learning. A post-megaproject BRI will need to take a more realistic approach in envisioning future environmental impacts. Existing research categorizes the BRI’s environmental impact largely into four categories: impact on the atmosphere, the biosphere, the hydrosphere, and the human sphere. Although these broad categories have been outlined, interactions between various categories of factors have not been carefully studied. Similarly, energy-economy models are widely used to analyze climate policies, develop decarbonization pathways, and assess the values and roles of key technologies, yet there remains a lack of policy realism in decarbonization-related modeling. Having accumulated learning from hundreds of projects, the BRI bears great potential in converting knowledge from megaproject development to actionable policy insights that helps enhance the environmental performance of future projects. Summarizing case-based learning and combining this with future-oriented decision support tools will help inform a realistic plan for the next stage of BRI development.
Strengthen “post-mortem analyses” of problematic projects. The Chinese government, through collaboration with foundations and research institutes, has started identifying a repository of green BRI projects for a green transition that encompasses green transport, energy, manufacturing, industrial zones, agriculture, and forestry. These projects demonstrate China’s growing awareness of environmental challenges and its intent to take leadership in greening its overseas activities. It is also working with host country governments in cultivating demonstration projects that showcase green principles, as demonstrated by pilot projects in the China-Pakistan Economic Corridor. On top of providing policy guidelines for project-level environmental good practices, it is equally important to create a project list of incomplete and unsuccessful projects due to environmental considerations, and conduct “post-mortem analyses” to understand the local contexts and common challenges for environmental governance. Case studies on BRI project outcomes offer a fertile ground for such reflection and should be treated more attentively regarding their policy relevance, keeping in mind that history is the best teacher in the BRI’s green transition.
Developing a Green BRI Project Pipeline
In addition to attending to the impacts of existing projects, it is equally important to develop a new project pipelines facility to provide countries with more bankable green projects, and to encourage partner countries in the Global South to pursue climate-friendly projects that benefit both their economies and the environment. A better understanding of the supply and demand relationship in green project finance lies at the heart of designing a bankable project pipeline and enhanced project cooperation.
In the previous stage of BRI development, China’s needs to export industrial capacity met the host countries’ need to fill infrastructure gaps and promote economic growth, which explains why BRI projects were received with enthusiasm in their initial stage of development. In an ideal world, the same supply and demand structure would remain in BRI green transition. China’s global technological edge in green energy and its willingness for technology export, and BRI participating countries’ need for financial and technical support would together result in a greater emphasis on green energy, digitalization, and a decline in fossil fuel financing. This would align with China’s new environmental norms and interests as well as global efforts to combat climate change.
In reality, challenges come from both the supply and the demand side. On the supply side, despite China’s enthusiasm for internationalizing its green transition and stepped-up support for renewable energy projects, there remains a large financing gap for supporting green investment in BRI participating countries and a shortage of bankable green projects. On the demand side, host countries face multiple challenges in engaging in BRI cooperation on green finance, including the absence of incentive policies, pressure from conventional energy sectors, lack of investment capacity for renewable development, and limited experience in cooperation with China.
Identifying areas of cooperation where actors involved share more common ground is key to BRI development. Based on China’s comparative advantages and burning concerns from host countries in green development, five domains of cooperation are key in the green BRI project pipeline. These include 1) innovative financing for renewable energy installation and associated infrastructure, 2) support for renewable energy manufacturing in developing countries, 3) addressing emissions from existing high-carbon infrastructure, 4) investing in sustainable development of transition minerals, and 5) eliminating infrastructure-driven deforestation in global forest hotspots. Policymakers and investors may consider promoting the green transition of brown projects by incorporating these elements in project development.
A viable project pipeline also requires realistically addressing the developmental needs of the Global South. Most BRI participating countries are grappling with the dual challenge of development and decarbonization amid a global discourse that increasingly prioritizes the latter. Yet it is crucial to recognize that host countries truly seek access to employment opportunities and economic growth. Building a green BRI project pipeline calls for recognizing the region- and country-specific needs based on their varied developmental stages and identifying diversified pathways to decarbonization and sustainable development. While China has pledged to stop financing overseas coal projects and to promote low-carbon growth, most BRI countries still use coal-fired power as their main source of electricity. In addition to hard infrastructure projects, it is important to conceive capacity-building programs that help lower the cost of power generation and step up support for the development of renewable energy through localized production and transfer.
A steady project pipeline of green BRI projects requires funding sources beyond Chinese policy banks’ loans. Research shows that co-financing correlates with higher infrastructure completion rates; co-financing with partners from the recipient country is associated with more localized implementation; and co-financing with international partners has demonstrated improved environmental performance. These findings highlight the importance of a collaborative approach to developing infrastructure projects in the Global South, which remains relatively sparse in BRI cooperation. New business models and frameworks for project co-financing that combine debt and equity should be encouraged, as exemplified by special equity funds such as the Silk Road Fund and the China-Latin American Cooperation Fund. BRI cooperation may also benefit from encouraging the private sector to take on a more active role in project finance given their rising prominence in Chinese foreign direct investment, yet evolving domestic politics add uncertainty to this option.
To raise more funding for green BRI, it is also important to create a risk-sharing protocol based on broad-level, early feedback from the lending community. Doing so requires implementing a more inclusive multi-stakeholder consultation process in project planning.
Conclusion
The BRI’s shift away from the megaproject-driven approach reflects the global community's evolving priorities. While the megaproject era brought an infrastructure boom, it also posed socio-environmental and economic challenges. The “small is beautiful” philosophy highlights the need for projects that balance economic viability with environmental responsibility. As the BRI goes through its green transition, it has stepped up technology and financing support for green development that is enabling the developing world to effectively decarbonize. Host countries also appreciate China’s approach and the flexibility it provides in implementing projects based on their needs and circumstances. As the BRI enters its post-megaproject phase, global decisionmakers still face the hard question of how to maintain the comparative advantages of China’s infrastructure-led development model while attending to the associated risks and the emerging challenges. Using infrastructure as a long-standing vehicle of development to solve 21st century’s problem requires comprehensive reflection, a collaborative approach, and collective action.
Keren Zhu an incoming Assistant Professor of Political Science (International Relations of East Asia) at Davidson College. She is a postdoctoral fellow at the India China Institute, The New School and a former Global China Post-doctoral Research Fellow at the Boston University Global Development Policy Center. She holds a Ph.D. in Policy Analysis from the Pardee RAND Graduate School. Her research focuses on the Belt and Road Initiative (BRI), global infrastructure, and sustainable development. She worked on BRI policy advisory in China from 2015-2017.
References
Ascensão, Fernando, Lenore Fahrig, Anthony P. Clevenger, Richard T. Corlett, Jochen AG Jaeger, William F. Laurance, and Henrique M. Pereira. 2018. ‘Environmental challenges for the Belt and Road Initiative.’ Nature Sustainability 1: 206–209.
Boston University Global Development Policy Center Chinese Overseas Development Finance Database.
China Global Investment Tracker, 2021
Flyvbjerg, B. ed., 2017. The Oxford handbook of megaproject management. Oxford University Press.
Tang, X., 2021. Coevolutionary pragmatism: Approaches and impacts of China-Africa economic cooperation. Cambridge University Press.
Zhou, L., Gilbert, S., Wang, Y., Cabré, M.M. and Gallagher, K.P., 2018. Moving the green Belt and Road Initiative: From words to actions.
Zhu, K., Shi, R. and Lempert, R., 2020. Recalibrating the Belt and Road Initiative amidst deep uncertainties. Journal of Mega Infrastructure & Sustainable Development, 2(1), pp.47-68.
Zhu, K., Mwangi, B. and Hu, L., 2023. Socio‐economic impact of China's infrastructure‐led growth model in Africa: A case study of the Kenyan Standard Gauge Railway. Journal of International Development, 35(4), pp.614-638.
Zhu, Q., Leibowicz, B.D., Busby, J.W., Shidore, S., Adelman, D.E. and Olmstead, S.M., 2022. Enhancing policy realism in energy system optimization models: Politically feasible decarbonization pathways for the United States. Energy Policy, 161, p.112754.