By: Mayora Bunga Swastika, Nadira Asrifa
The Belt and Road Initiative (BRI) is a global project China introduced in 2013. It aims to establish an extensive network of connectivity, encompassing both land routes (referred to as economic Silk Roads) and sea routes (known as Silk Sea Routes), connecting China to nations across Asia, Europe, the Middle East and Africa.
The economic Silk Road constitutes a land route linking China and Europe through Central Asia, while the Silk Sea route comprises a network of maritime lanes connecting ports in Southeast Asia, South Asia, the Middle East and Africa. The BRI has notable ramifications in the energy sector, including enhancements in energy connectivity, infrastructure and investments in energy resources.
In the context of transitioning to renewable energy, the BRI holds the potential to positively influence the countries traversed along these routes, particularly those in Southeast Asia. China has the capability to facilitate technology, industry development and investment in renewable energy.
The Southeast Asian nations in particular possess significant untapped potential for renewable energy generation, with the region having the capacity to achieve net-zero emissions and adopt clean energy sources amounting to around 17,000 Gigawatts combined.
Moreover, countries in Southeast Asia have set targets to reduce emissions by integrating more renewable energy sources into their energy mix. For instance, Malaysia has raised its renewable energy mix target from 20 percent in 2025 to 31 percent in 2025 and 40 percent in 2030, while Indonesia aims for 23 percent by 2025 and 31 percent by 2030. The Philippines has set goals of 30 and 50 percent for energy renewables in their power generation mix by 2030 and 2040, respectively.
Aligned with the growth of renewable energy in Southeast Asia, in September 2021, Chinese President Xi Jinping announced that China would refrain from constructing “new coal plants abroad”. This commitment also extends to the BRI, with China discontinuing financial support for coal-based projects starting in 2021.
Instead, China shifted its focus within the BRI to allocate funds to projects involving alternative fuels like natural gas, oil and renewable energy. Southeast Asian nations can capitalize on the opportunities presented by China’s BRI initiative. Both China and the Southeast Asian countries share objectives for transitioning their energy systems as part of the global efforts to address climate change.
China’s investments in renewable energy projects under the BRI umbrella could facilitate Southeast Asian countries’ shift to cleaner and more sustainable energy sources. Additionally, China’s expertise and advancements in technologies related to clean energy, such as hydropower, wind and solar power, can support the development of cleaner and more efficient energy systems. Following the sharing of advanced technology and capacity-building, its partners would stand to benefit.
Nonetheless, a range of specific challenges could potentially confront countries in the region. To begin with, it is imperative to recognize that the interplay of geopolitical tensions has the capacity to significantly impact the cooperative efforts between Southeast Asian nations and China. A case in point is the intricate web of geopolitical tension that has arisen between China and Southeast Asian countries, presenting multifaceted hurdles to the effective execution of the BRI.
The tension originated from territorial disputes within the South China Sea, where several nations in Southeast Asia like Vietnam, the Philippines and Malaysia assert rival claims against China over the sovereignty of islands and maritime rights.
These Southeast Asian countries have voiced their apprehensions in response to China’s assertive territorial assertions and its progressively expanding military presence within the region.
On top of the geopolitical complexities, there is a layer of challenges linked to financial capital. Numerous experts have cautioned the potential emergence of a “debt trap” wherein countries could find themselves ensnared in economic dependency on China due to the loans extended for various BRI initiatives.
Moreover, several nations within Southeast Asia continue to grapple with post-pandemic recovery and an economy fraught with instability. This vulnerability further exacerbates the intricacies of their engagement with the BRI.
Furthermore, the risks tied to stranded assets need to be addressed, regardless of the uncertainties prevailing around economic forecasts and future policies governing construction regulations, carbon taxation, and emissions quotas.
For instance, Vietnam in 2020, one of the main actors of the BRI coal power cooperation, pledged to diminish its planned coal power project. This calls for a meticulous approach to balancing financial and environmental considerations within the BRI projects, as these risks could potentially amplify existing challenges and heighten the intricacy of the economic landscape for participating nations in Southeast Asia. These issues are an inherent part of international relations and cannot be entirely avoided.
Therefore, establishing a well-defined road map for collaboration is essential for countries in Southeast Asia and China to work together with the common objective of clean energy projects tied to its overseas development finance. This action would effectively communicate robust and unambiguous policy directives, aligning with the principles of environmentally friendly investments along the green BRI.
Secondly, Southeast Asian countries and China should exercise careful consideration of the environmental risks within the scope of renewable energy development financing along the BRI route, such as emphasizing wind power to stimulate the diversification of financing sources for renewable energy. It is worth noting that the analysis also involved distinct credit risk levels, different income statuses and various recipients.
Lastly, China should collaborate with international development finance institutions to ensure a well-calibrated energy transition process. This involves supporting emerging and developing economies in constructing low-carbon, eco-friendly infrastructure.
The opinion has been published on The Jakarta Post.
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