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Green Development Guidance for BRI Projects Baseline Review Report

The COVID-19 outbreak leads us to a deeper understanding that contemporary crises, like the environmental and climate challenges, closely bind us on a global scale. It is a wake-up call to the world that mankind is a community with a shared future. The sustainability of this shared future can only be achieved with humanity living in harmony with the nature and through collaborative global efforts switching to the low-carbon development. The greening of the Belt and Road Initiative (BRI) can deliver solutions to advance the sustainable development goals and the resilient recovery in the wake of the pandemic.

The goal to achieve high-quality development of BRI imposes higher requirements on promoting sustainable infrastructure and safeguarding the eco-environmental quality. To fully implement the 2030 Agenda, and to seize the investment and cooperation opportunities that the BRI high-quality development creates for the post-pandemic social and economic recovery, a set of clear and operable green development guidance is needed. It will guide the BRI projects to comply with the principle of green, low-carbon and sustainable development.

The Joint Research on Green Development Guidance for BRI Projects (Guidance Project) aims to explore the formulation of guidelines on the assessment and classification of BRI projects from the perspective of preventing ecological and environmental risks, provide green solutions for participating countries and projects, and support decision making for stakeholders. This report is the Phase I baseline study to the Guidance Project. Through in-depth analysis of environmental policies, safeguard measures and practices of governments, financial institutions and NGOs around the world, this report summarized best practices for recognizing and addressing eco-environmental and climate risks in overseas investment, developed a project classification framework that forms the positive and negative lists, and proposed recommendations to promote green development of BRI projects.

Establish the BRI Project Classification System and the Positive and Negative Lists

The report defines environmental goals from the perspectives of combatting pollution, mitigating climate change, and protecting the biodiversity. BRI projects are therefore classified into three categories: The Red projects that require stricter supervision and regulation, the Yellow projects with moderate environmental impact, and the Green projects that are encouraged.

The BRI Project Classification System provide a flexible assessment mechanism. To ensure scientific, effective, and operable project categorization, a two-tiered system is proposed to evaluate the direct impact on and contribution to environmental objectives (the first step), and the availability of “mitigation” measures through environmental management, for example, by applying safeguards (second step).

Starting out from the classification, the report selected sectors of energy, transport, manufacturing, mining and agriculture and land use and proposed the positive and negative lists of BRI projects.

Enhance the Whole Lifecycle Environmental Management in Overseas Investment Projects

The baseline report studied the policies, standards, and actions that aim at shifting investment from brown to green, including the practices from China, EU, OECD, IFC, the World Bank among others, proposed 9 key recommendations including 1) establish a set of green development framework covering all project phases, 2) establish exclusion lists for heavy-polluting projects; 3) environmental impact assessment (EIA) is identified as one of the effective measures reducing the environmental risks in overseas investment; 4) differentiated management and financing to projects of different impact levels; 5) proper management should be ensured by a working environmental and social management system (ESMS); 6) Grievance redress mechanism; 7) covenants to be included in investment agreements; 8) Public environmental reporting and 9) environmental data sharing.

Prioritized Action Areas in Forming the Green Development Guidance for BRI Projects

1. Establish a classification system for BRI projects, further specify the lists of positive and negative projects with technical guidelines and details provided.

2. Explore the environmental risk assessment for BRI key industries in line with the environmental requirements of the host country, as well as with Chinese and international best practices. Guidance and provision of EIA criteria, requirements and tools for key BRI industries to conduct EIA is needed, as well as capacity building to relevant stakeholders

3. Establish the mechanism for rigorous supervision and an Environment and Social Management System during the whole lifecycle of the project and apply measurable environmental governance measures. Guide and provide capacity building to project investors and implementers to pursue greener overseas investment. Encourage investors to reduce potential environmental risks informed by the project classification and through a grievance redress mechanism that enables responding to environmental complaints in a timely and transparent manner.

4. Establish a sound incentive and punishment mechanism to guide financial institutions for differentiated management of projects. Encourage financial institutions, investors, project implementors, and government agencies to shift investment to green by classifying BRI project based on their environmental impact, and applying the appropriate lifecycle management featuring differentiated decision-making, risk evaluation, financing, performance review, and disclosure for projects on positive and negative lists, leading the capital to greener projects.

5. Support piloting and promote application of the Guidance Project. Considering the contexts of BRI countries, a classification system and project lists adapted to local resources, environment, and socioeconomic conditions should be developed as a reference for the host government; and local demonstrations of application should be promoted to encourage and facilitate its extension into more BRI participating countries.

The Green Development Guidance for BRI Projects Baseline Study is chaired by Mr. Erik Solheim, Convener of the BRI International Green Development Coalition (BRIGC) Advisory Committee, Special Advisor World Resources Institute (WRI) and Ms. Zhou Guomei, Executive Director General of Foreign Environmental Cooperation Center, Ministry of Ecology and Environment (MEE) as the co-leaders. Authors of this report include experts from Foreign Environmental Cooperation Center (FECO) of MEE, Appraisal Center for Environment and Engineering (ACEE) of MEE, International Institute of Green Finance (IIGF) of Central University of Finance and Economics (CUFE), World Resources Institute (WRI), Climate Bonds Initiative (CBI), ClientEarth, World Wildlife Fund (WWF) and other Chinese and international research institutions.

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