From petrostates to green leaders: China and the Gulf's climate commitment

The 28th Conference of the Parties to the UN Framework Convention on Climate Change (COP28) will take place from November 30 to December 12, 2023, at Expo City Dubai in the United Arab Emirates (UAE). COP28 comes at a pivotal moment for international climate action. The findings of the UN “Global Stocktake” on global action to address climate change, released in a Synthesis Report in September, reveal just how far the world is from achieving the Paris Agreement’s goals and emphasize that the window of opportunity is closing.

Recently returned from a visit to China, UAE’s Ahmed Al Jaber, COP 28 president-designate, commended China’s “remarkable leadership” in transitioning to cleaner energy sources, lauded China’s progress in renewable energy adoption and highlighted China’s role in expanding green growth through South-South cooperation. With COP28 on the horizon, Chinese official media have been keen to showcase Beijing’s green energy cooperation projects in and with Belt and Road Initiative (BRI) partner countries, including the Gulf petrostates. Green development is the focus of one of the three high-level forums at this month’s Third Belt and Road Forum, marking the tenth anniversary of the BRI. Meanwhile, the Gulf countries have been ramping up their climate efforts.

China’s “greening” of the BRI, the Gulf petrostates’ enhanced efforts to “green” their economies and finances, and the expansion of Sino-Gulf cooperation in clean and low-carbon technologies are encouraging steps forward in meeting the sustainability challenge. But with COP28 just weeks away, a crucial element is missing to capitalize on these promising developments and help drive the green transition. US-China collaboration — key to catalyzing the international community’s lagging effort to address climate change — is on the verge of becoming a casualty of an unhealthy form of “great-power competition.” 

“Greening” the BRI 

The International Energy Agency (IEA), whose April 2023 report Credible Pathways to 1.5°C outlines four pillars for action to meet climate goals, states that capacity additions of renewables need to triple from 2022 levels by 2030 but face enormous technological and financial gaps.

Renewable energy expansion is a cornerstone of China’s overall energy security strategy. A recent report by Global Energy Monitor found that China is on pace to double its wind and solar energy capacity and hit its 2030 clean energy targets five years early. According to the same report, China’s combined onshore and offshore wind capacity is already roughly equal to that of the other top seven countries, while its operating large utility-scale solar capacity surpasses the rest of the world combined.

China has been taking steps to align the Belt and Road Initiative (BRI) with its national strategy to drive sustainability. In the lead-up to the First Belt and Road Forum in 2017, the Chinese government released the “Guidance on Promoting a Green Belt and Road” for sustainable development within the initiative. The guidance encouraged companies operating overseas to observe local environmental laws and called upon them to adopt higher environmental standards. It also advocated for the creation of green banks and the use of China’s policy banks to channel funds to green projects. However, the guidance was short on details and lacked compliance mechanisms. In addition, some BRI projects undertaken by Chinese state-owned enterprises and banks — such as the Chinese-funded coal-fired power plant in Lamu, Kenya and rail and port projects in Sri Lanka — sparked environmental protests and lawsuits. 

Stung by criticism that the BRI threatened UN climate goals, President Xi Jinping, addressing attendees at the April 2019 Second Belt and Road Forum (BRF) stressed “open, green and clean cooperation.” Soon thereafter, Beijing announced a series of new initiatives to rebrand BRI as a “green Silk Road.” This attempt to shift the BRI toward improved environmental outcomes is now underpinned by several cooperation mechanisms, including the BRI International Green Development Coalition (BRIGC), the BRI Green Development Institute, and the BRI Environmental Big Data Platform. 

Policy frameworks for greening the BRI are in place, setting the stage for China to export its green ambitions and expertise along the Belt and Road. In March 2022, the Chinese government published a key policy document on the further greening of the Belt and Road Initiative (BRI), titled “Opinions on the Joint Implementation of Green Development in the Belt and Road Initiative” (the “Opinions”). The document further clarifies China’s green BRI ambitions and provides comprehensive policy directions for future “green” overseas engagement. The 2023 white paper on “China’s Green Development in the New Era” (2023) affirms Beijing’s commitment to “working with other countries on promoting green development under the Belt and Road Initiative, making it a green initiative.” 

China has developed capabilities to meet the increasing demands for green energy. According to the IEA, China has established itself as the leading global supplier of clean energy technologies and a net exporter of many of them. As the world’s largest manufacturer of solar panels, wind turbines, batteries, and electric vehicles (EVs), China is well-positioned to bring low-carbon technologies to emerging markets and developing economies (EMDEs). A report issued last year by the World Economic Forum in collaboration with PwC China states that projects deploying these technologies along the Belt and Road could help advance the green development of BRI participants.

Research shows that although China’s outbound lending under the Belt and Road framework has been in decline since 2016, the BRI is not fading away. Beijing is selecting projects and partners more carefully and prioritizing green initiatives. Since the 2nd Belt and Road Forum in 2019, Chinese companies and investors have been engaged in numerous “green” projects, particularly in green energy, such as solar and wind. In its latest assessment, the Green Finance and Development Centre (GDFC) at Fudan University found that 56% of China’s $8.61 billion in engagement in the energy sector in BRI countries during the first half of 2023 went into renewable energy projects — “the greenest” for any six-month period since the initiative’s launch a decade ago.

The Gulf turning “green”

During the past few years, as China started “greening” the Belt and Road, the Gulf Cooperation Council (GCC) states — all six of them BRI partner countries — themselves have begun to pivot toward renewables. On the frontlines of climate change, the Gulf countries are already experiencing adverse climate impacts, ranging from extreme weather events to depleted freshwater and sea level rise. Responding to these challenges, as Karen Young notes in a recent article in Foreign Affairs, “Gulf states are now presenting themselves as drivers of a global clean energy transition.” 

Facing conflicting pressures, the Gulf states are seeking to improve the carbon footprint of oil and gas production, strengthen their position in LNG and downstream products future markets, and secure first-mover advantage in low-carbon hydrogen. Most of the GCC region’s established renewable energy capacity can be found in the UAE and Saudi Arabia. Encouragingly, they and their fellow Gulf states are taking steps to bolster their green credentials. In 2022, Gulf Sovereign Wealth Fund (SWF) investments in renewable energy surpassed spending on fossil fuels. Qatar, which in 2022 inaugurated its Al Kharsaah Solar Power Plant, plans to construct two other solar plants at Ras Laffan and Mesaieed to expand grid capacity. 

The Gulf states are not only investing in domestic clean energy development while seeking foreign investment partners to do so, they are also investing aggressively in renewable energy and carbon-intensive projects outside the Gulf region. As of mid-2023, the Emirates had invested in renewable energy projects worth approximately $16.8 billion in 70 countries. Masdar, a leading developer and operator of utility-scale clean energy projects and a prominent player in international renewable and hydrogen projects, announced in October plans to invest $8 billion in renewable energy projects in Malaysia. Similarly, the international portfolio of Saudi Arabia’s ACWA Power — a private company whose projects span renewables, water desalination, and green hydrogen — is expanding, with deals reaching financial closure in Egypt and Uzbekistan over the past year, and new opportunities being sought in Thailand and Africa.

Ahead of COP28, the UAE updated the UAE Energy Strategy 2050 by setting goals for 2030 and energy strategies to achieve net zero by 2050. Abu Dhabi National Oil Company (ADNOC) recently announced its intention to accelerate its net-zero emissions target to 2045 instead of its previous commitment for 2050. The UAE and Saudi Arabia have pledged to invest heavily in generating clean energy. However, it is important to note that the pivot to renewables does not signal an end to their heavy dependence on hydrocarbons. Instead, it represents what both countries consider a pragmatic transition that involves both renewables and existing fossil fuels at lower carbon intensities. The Gulf states’ preferred pathway to net zero is one that increases the proportion of clean energy sources in the energy mix, continues investment in hydrocarbons, and integrates clean technologies into the energy sector to mitigate emissions.

China-Gulf renewable relations

The mixed energy future favored by the Gulf petrostates dovetails with China’s plans and perspectives. China’s climate envoy, Xie Zhenhua, who will represent China at COP28, has said that it is unrealistic to completely phase out fossil fuels. China, the world’s biggest consumer of fossil fuels, has signaled it intends to continue using them for decades. At the 2021 Glasgow climate talks, China led the push to change the language of the final agreement from “phasing out” to “phasing down” fossil fuels. 

Environmentalists are surely less than pleased with this convergence of thinking between China and the Gulf petrostates. Embracing “pragmatic” short-term policies could slow the long-term adoption of cleaner fuels to address climate change. The transition to a livable and sustainable future will be a massive undertaking — one that needs to accelerate to limit the impacts of climate change. 

Yet, it is possible to be pragmatic and ambitious at the same time. Along these lines, there is much to be gained by more extensive cooperation between China and the GCC states in the development and deployment of renewables within the Gulf region, across the wider Middle East, in Sub-Saharan Africa, and elsewhere. The foundation for such cooperation has already been laid.

Chinese companies have been particularly active in renewable energy projects in the UAE and Saudi Arabia. China’s JinkoSolar supplied solar panels for the Mohammed bin Rashid Al Maktoum Solar Park in Dubai. Mensha Ventures, a Dubai-based technology investment company, has signed a preliminary agreement with Chinese companies to invest in sustainable energy projects in the Gulf region. The new Green Tech Fund developed by Mensha and the Asia Development and Investment Bank, aims to build portfolio companies in green technology. Shanghai-listed Trina Solar recently announced that it has delivered 800 megawatts (MW) of 210mm Vertex modules to China Machinery Engineering Corporation (CMEC) for the Al Dhafra PV power plant project in Abu Dhabi, which was connected to the grid in April 2023.

Earlier this year, China-headquartered Sungrow announced it had signed a contract with China Energy International Group, the engineering, procurement, and construction (EPC) contractor for the solar power plant in the Al Shuaibah project in Mecca province. The two companies are also developing the Sudair solar facility. Both projects are backed by the Kingdom’s private investment fund (PIF). China’s Silk Road Fund (SRF) owns a 49% stake in Saudi Arabia’s ACWA Power Renewable Energy Holding (ACWA Power RenewCo.). Last December, ACWA signed MoUs with nine Chinese companies, laying the groundwork for financing, investment, and construction of clean and renewable energy projects in the Kingdom and other BRI countries. ACWA Power has teamed up with China’s Silk Road Fund to invest in renewables projects in Uzbekistan and elsewhere in Central Asia.

There is ample scope for further collaboration between China and the Gulf states in undertaking joint green and low-carbon energy transition projects both within and outside the region. These are activities that Washington and its Western partners should encourage and, where possible, complement as they represent shared in addressing climate change. A recent working paper by Joanna Lewis and Cecilia Springer contends that US-China coordination and cooperation could increase resources available for RE development in emerging markets and developing economies (EMDEs). One possible vehicle for collaboration is through combining or coordinating Western, Chinese, and Gulf sovereign wealth fund (SWF) climate finance to support green development in low-income countries. A healthy level of US-China tech competition can spur innovation and catalyze the uptake of clean energy. However, tensions from the US-China tech war have spilled over into green tech and climate efforts. It seems that national security motivations for developing green technologies are eclipsing climate change imperatives.

Conclusion

China’s efforts to “green” the BRI’s enormous environmental impact is a welcome development. Also welcome is the Gulf countries’ abandonment of blanket obstructionist positions in favor of accelerating the green transition at home and seeking to capture a share of the green energy market abroad. These two trends have manifested in increasing Sino-Gulf cooperation in green energy projects. 

A “healthy” form of “great-power competition” is one where the US and its Western partners, at minimum, refrain from measures aimed at undermining Sino-Gulf renewable energy and decarbonization initiatives. But the US-China strategic rivalry threatens to make renewables the next semiconductors, choking off the cooperation on clean energy that is needed to help emerging markets and developing economies (EMREs) curb greenhouse gas emissions and contain climate change while coping with its effects. The US and its Western allies face a choice between the competing strategic priorities of trying to decouple from China to achieve their national security goals or cooperating with China to achieve their climate and economic goals.

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