South China Morning Post
Advertisement
Advertisement
A demonstrator calls for richer nations, which some argue should include China, to make reparations for the climate loss and damage suffered by poorer nations, at the COP27 UN climate summit on November 18 in Sharm el-Sheikh, Egypt. Photo: AP
Opinion
The View
by Byford Tsang and Juan Pablo Osornio
The View
by Byford Tsang and Juan Pablo Osornio

As the biggest lender to poor nations, wealthy China can do more for climate finance

  • As the largest bilateral creditor to the world’s poorest states, China can prioritise climate concerns in debt relief
  • It can also support reforms and expansion at multilateral development banks so they can lend more to low-carbon projects and phase out fossil fuel financing
Byford Tsang
Juan Pablo Osornio
Byford TsangandJuan Pablo Osornio
Why you can trust SCMP
China has argued that rich nations should shoulder more of the burden in cutting planet-warming greenhouse gases. This “common but differentiated responsibility” principle, already enshrined in global climate agreements such as the Paris accord, is strongly backed by China and other developing countries in holding developed nations accountable for their historical emissions. But as China’s wealth and emissions grow, so does its climate responsibility.

Richer nations have built their prosperity upon the pollution that continues to destabilise the earth’s climate. Historically, the United States, 27 member states of the European Union and Britain are the largest emitters of greenhouse gases since the start of the industrial revolution.

China’s economic miracle, which has lifted more than 800 million people out of poverty and put it on the cusp of becoming a high-income country, was also powered by a fossil fuel-based energy system.

China is now the second largest economy in the world and the third largest historic emitter after the US and EU. Its cumulative emissions are projected to surpass that of the EU in the second half of this decade.

As China grows richer and its emissions accumulate, it will be increasingly difficult for China to remain in the same class as other developing countries, and Beijing recognises that. “As the levels of development in developing countries diverge, divisions in their interests in economic development and climate change will become more visible,” said a 2020 report by China’s top government climate policy think tank.

The discord in the long-standing alliance between China and other developing countries, predicted in the report, played out in the COP27 international climate negotiations just concluded in Egypt. Gaston Browne, the prime minister of Antigua and Barbuda, speaking on behalf of a group of small island nations under threat from rising sea levels, called upon China and India to help finance the rebuilding of countries after climate disasters.
The call came as countries reached a historic agreement at COP27 on a “loss and damage” fund to help pay for the impact of climate change on poorer nations. A transitional committee was set up to resolve questions of who would be eligible for the fund. Fine print regarding the fund’s beneficiaries – “developing countries particularly vulnerable to the adverse effects of climate change” – was introduced into the agreement by the EU, and is largely seen as a hook to expand the funding source to large emitters such as China.

China has responded to such pressure with caution, saying it is willing to support a “loss and damage” mechanism, but not with cash.

A move by China to fund such a mechanism within the UN climate convention could open up the country to financing demands from developing countries, not only to rectify climate damage, but also to finance their transition to a climate-neutral economy, something China is not currently obliged to do under the UN climate convention.

Still, China could do more. President Xi Jinping called upon the Group of 20 at the recent meeting in Bali to “take the responsibility inherent in being major and regional international players”. Raising the level of support on international climate finance is one way to respond to this call.

As the largest bilateral creditor to the world’s poorest countries, China should continue to work with fellow G20 members to ensure that the common approach to debt relief takes into account the debtor’s climate risk and the need to scale up investment in essential climate-resilient infrastructure.

A walkway goes through ponds and islets at the “Fish Tail” sponge park that’s built on a former coal ash dump site in Nanchang in China’s Jiangxi province, seen on October 30. The idea behind “Fish Tail” is to build and expand parks and ponds within urban areas to prevent flooding and collect water for times of drought. Photo: AP
China should set out a plan to deliver on its pledges. Last year, China committed to ending international coal finance and ramping up support for renewable energy in developing countries. And in 2015, Xi pledged to provide US$3.1 billion worth of finance through the South-South Climate Cooperation Fund. So far, only 6 per cent of that goal has been delivered.

Other than offering bilateral finance to other developing countries, China could leverage its influence as a shareholder in the International Monetary Fund and various multilateral development banks to fill the gap in international climate finance.

World is waking up to how development banks can fund social good

First, China should support actions to implement the five-point plan recommended by a G20-commissioned report to boost the investing capacity of multilateral development banks, which have the potential to unleash US$1.2 trillion of private capital. This should start with supporting the reform of capital adequacy policies at the World Bank, which will hopefully spread to other development banks.

Second, as a founding member of the New Development Bank and the largest shareholder of the Asian Infrastructure Investment Bank, China could facilitate new and additional financial flows into low-carbon projects by expanding these banks, and setting targets to phase out fossil fuel financing. Similar efforts should be made at major state-owned banks such as the China Development Bank and Export-Import Bank of China, to give them an explicit climate focus within their mandates.
At COP27, countries agreed that a transformation of the international financial system was necessary to fill the estimated US$6 trillion annual financial gap needed for the global transition to a low-carbon economy. Taking part in the transformation of the international financial system will show China’s willingness to tackle the country’s growing climate responsibility and be a step forward in achieving Xi’s vision of building a “community with a shared future”.

Byford Tsang is a senior policy adviser at E3G, an independent climate change think tank

Juan Pablo Osornio is the programme lead for the climate diplomacy team at E3G

Post