{"id":50026035,"date":"2019-04-23T16:27:25","date_gmt":"2019-04-23T15:27:25","guid":{"rendered":"https:\/\/stage.dialogochino.net\/?p=26035"},"modified":"2023-03-12T18:30:11","modified_gmt":"2023-03-12T18:30:11","slug":"26035-china-learns-to-tackle-environmental-problems-the-hard-way","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/26035-china-learns-to-tackle-environmental-problems-the-hard-way\/","title":{"rendered":"China learns to tackle environmental problems – the hard way"},"content":{"rendered":"

Plagued by conflicts over water use and labour standards, Shougang\u2019s 1992 acquisition of an iron ore mine in Peru\u2019s Marcona district \u2013 the first major Chinese investment in the country \u2013 landed it a reputation<\/a> as an opaque, uncaring natural resource hunter.<\/p>\n

Today with its mushrooming presence in Latin America, China is still linked to poor environmental performance on one hand, and to renewable energy and international climate commitments on the other.<\/p>\n

The two roles are hard to reconcile.<\/p>\n

Rhetoric versus reality<\/h2>\n

Top-level rhetoric on sustainability doesn\u2019t match the realities on the ground, according to Paulina Garz\u00f3n, director of the China-Latin America Sustainable Investment Initiative.<\/p>\n

\u201cWe hear about the Paris Agreement, about the flourishing of the solar industry and electric busses<\/a>, but they still haven\u2019t really taken on the importance of environmental issues in the global arena,\u201d she said.<\/p>\n

Garz\u00f3n said many problems at the US$2.5 billion<\/a> Coca-codo Sinclair hydroelectric project in her native Ecuador result from using decades-old<\/a> hydrological studies of the Coca river. Its behaviour, she said, has since changed drastically.<\/p>\n

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13<\/p>\n

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\nworkers died at the Coca-codo Sinclair hydro plant in a 2015 accident
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Constructed by Sinohydro and 85% financed by the Export-Import Bank of China (Exim), both state-owned, Coca-codo Sinclair became operational in 2016 after numerous delays. In December, the New York Times<\/em> reported that it is cracking up<\/a>. Three years previously, a pressure well collapsed, killing 13<\/a>.<\/p>\n

With China-backed projects hampered by poor environmental risk management throughout Latin America, companies have learned lessons \u201cpainfully\u201d, according to Ren Peng of the Beijing-based Global Environmental Institute<\/a>.<\/p>\n

\u201cIt was a lack of awareness in the early stage of going abroad, but now there\u2019s more know-how,\u201d he told Di\u00e1logo Chino<\/em>.<\/p>\n

He added that Chinese companies are sensitive to reputational and economic costs, as any company would be irrespective of their nationality. Though he said companies\u2019 \u201clanguage\u201d is not yet aligned with international commitments on sustainability.<\/p>\n

Kevin Gallagher, professor of global development policy at Boston University<\/a> said that deferring to host countries\u2019 laws on environmental management has proven costly for Chinese companies:<\/p>\n

\u201cChina is learning – the hard way – that it needs to have its own set of enforceable social and environmental risk management systems for its financing in Latin America.\u201d<\/p>\n

Denisse Linares, a researcher at Peruvian NGO Environmental Law and Natural Resources, said her government has eased criteria for environmental impact assessments in order to attract foreign investment.<\/p>\n

Trade agreements<\/a> inked with China in 1988 and 2016 sorely lack the environmental safeguards contained in equivalent deals with the European Union, she said.<\/p>\n

\u201cIn 30 years, we haven\u2019t seen an evolution for the better.\u201d<\/p>\n

Guidelines, not laws<\/h2>\n

The Chinese government has introduced a series of guidelines to limit the impacts of companies\u2019 projects overseas.<\/p>\n

The 2012 Green Credit Directive<\/a> orders Chinese banks to adhere to international socio-environmental standards. Commitments to stimulate green finance<\/a> and a new policy<\/a> on environmental risk management overseas followed in 2016 and 2017, respectively.<\/p>\n

None are legally binding.<\/p>\n

According to Zhang Jingjing, an environmental lawyer, they are ineffective: \u201cHave you ever seen any bank get administrative penalties because it didn\u2019t follow those guidelines?\u201d<\/p>\n

Zhang said that despite good public interest laws in China, no cases have yet addressed outbound investment as they don\u2019t have the jurisdiction.<\/p>\n

Chinese companies have been encouraged to \u2018go out\u2019, and Chinese lawyers and NGOs, we also need to go out<\/p><\/blockquote>\n

Katharine Lu, senior sustainable finance coordinator at Friends of the Earth US, agreed that implementation is a longstanding problem but said the policies at least show China\u2019s acknowledgement of its overseas impact.<\/p>\n

\u201cIf you look at any other country, the US or European countries, there is no equivalent policy, let alone a whole policy suite and framework,\u201d she said.<\/p>\n

A key element for Lu in upholding environmental policies is engaging those who monitor the impacts of projects.<\/p>\n

Western lenders developed environmental and social policies in response to civil society intervention. Many safeguards and accountability mechanisms were born out of project crises happening on the ground. Chinese banks are learning that they too have to engage.<\/p>\n

Zhang said: \u201cChinese companies have been encouraged to \u2018go out\u2019, and Chinese lawyers and NGOs, we also need to go out.\u201d<\/p>\n

The positives<\/h2>\n

A recent study<\/a> by the International Union for the Conservation of Nature (IUCN) and the Leave it in the Ground Initiative (LINGO), highlighted positive examples of responsible Chinese corporate practice.<\/p>\n

It cites Sinohydro\u2019s withdrawal from the controversial Aguas Zarca<\/a> dam in Honduras as local indigenous Lenca resisted construction on a river they consider sacred. Sinohydro pulled out prior to Dutch and Finnish investors.<\/p>\n

\u201cEven if it’s one in one hundred, we still think the move in that direction is helpful,\u201d said report co-author Kjell Kh\u00fcne of LINGO.<\/p>\n

Liliana Jaregui of IUCN said positive examples can be useful for Latin American NGOs, whose \u201cconfrontational\u201d strategy isn\u2019t always effective.<\/p>\n

Huang Wei, a former climate and energy campaigner at Greenpeace East Asia, interviewed<\/a> top executives from Chinese banks and companies on how to put the government\u2019s guidelines into practice.<\/p>\n

Green groups\u2019 thinking on environmental risk, which encompasses such societal ills as pollution, differs to practitioners, who consider multiple risks and pay attention to hard regulatory benchmarks and profit margins, Huang told Di\u00e1logo Chino<\/em>.<\/p>\n

\u201cIt\u2019s just very practical. They don\u2019t consider it from a moral point of view.\u201d<\/p>\n

Energy investment<\/h2>\n

China\u2019s \u2018Go Global\u2019 policy encouraging investors to seek opportunities overseas, which President Xi Jinping repackaged as the Belt and Road Initiative<\/a> (BRI) in 2013, has largely meant securing food and energy resources.<\/p>\n

As growth has slowed<\/a> domestically, it has increasingly become a conduit for its industrial overcapacity.<\/p>\n

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