EAF editors
The Australian National University
In Brief
A Chinese 'Green Marshall Plan' could facilitate the developing world's energy transition, stabilise China's domestic economy and rally support for the multilateral trading system. But for it to be successfully executed, it will need to be grounded in a multilateral endeavour with support from partners and financial institutions like the International Monetary Fund.
Achieving net zero carbon emissions globally was never going to be easy. It’s been made that much harder and more costly by US President-elect Donald Trump’s promises to withdraw from the Paris Agreement, ramp up US production of carbon fuels and cut American access to low-cost renewable goods and inputs to renewable energy production even further through imposts on foreign trade.
The task of cutting emissions requires reducing the carbon footprint in consumption (for example, via increased use of electric vehicles) as well as in inputs into production (via the sourcing of electricity, the processing of metals and materials manufacture).
Improving energy efficiency is a high priority in reducing the costs of decarbonisation and is best achieved through international trade in the whole range of consumer and producer goods and inputs (such as electric vehicles, solar panels, wind turbines, processed lithium, iron and other minerals) that are necessary to achieve it. Using the strong complementarity in the new energy goods production and supply chains between China and other economies around the world is thus crucial to reducing the costs of the global energy transition.
The energy transition requires a massive transformation in production and consumption around the world over the next few decades. At the heart of that is the electrification of industrial economies with renewable power.
This industrial transformation will need vastly improved access to climate finance, ensuring both that existing funds are properly allocated and that they are utilised in a way that does not undermine climate goals. The global climate finance landscape is growing rapidly, with large amounts of financing now coming from China, but funding amounts are still insufficient to fulfil the Paris Agreement objectives.
There’s a huge gap estimated at US$5 trillion annually in both public and private sustainable financing over the coming decades.
Investment incentives need to align with climate goals. The efficacy of financial markets can be strengthened by harmonising sustainable finance taxonomies across jurisdictions and improving corporate disclosures and data sharing. China and the European Union have worked together on green finance definitions, publishing the Common Ground Taxonomy Table. Singapore has now signed on to an extension of this arrangement, the Multi-Jurisdiction Common Ground Taxonomy.
In this week’s lead article, noting the failure of COP29 to fill the public sustainable finance gap, Yiping Huang proposes that China initiate a Green Marshall Plan to step into the breach, elevating its contribution to investment in a zero carbon future and creating a facility for delivering its new energy technologies to the developing world.
‘China has emerged as an industry leader in the green energy sector over the past few decades, especially in the production of electric vehicles, lithium batteries, wind turbines and solar panels,’ Huang notes.
China is also an acknowledged leader in green development. Its vast supplies and low cost of green energy products are valuable resources for the world’s energy transition. ‘Just like the United States’ Marshall Plan after the Second World War, China can help green development in the Global South by providing both technological assistance and financial support’, he suggests.
The proposed Green Marshall Plan is designed to achieve two immediate goals.
The first is to facilitate the developing world’s energy transition, says Huang. While developed nations currently lack both the willingness and capability to lead global green development, China has advanced technology and vast production capacity that can help.
The second is to stabilise China’s domestic economy. The United States and European Union are raising barriers against Chinese green energy products entering their markets. This could exacerbate China’s domestic overcapacity problem and weaken economic growth if China does not find new markets for its green energy products.
A Chinese Green Marshall Plan initiative could be helpful on two counts: it would add to the pool of funds for green investment in the developing world; properly conceived and carefully executed, it would also help to push back against the intensification of American protectionism and additional costs it imposes upon energy transition, at least beyond those to the United States itself.
To succeed, in the latter purpose in particular however, it would have to be grounded in a multilateral endeavour with sign-on from other partners, like Europe, in its execution, and be facilitated with the help of multilateral financial institutions such as the International Monetary Fund.
Funding under a program of the kind that Huang envisions would be a hybrid package consisting of commercial investment, policy lending and government aid. It would also have to be commercially viable — the increasingly low-cost green energy products produced by China make this a goal that is achievable. In addition to aid provided by governments, especially those of developed nations, national policy banks and multinational institutions would provide low-interest long-term lending to countries in the developing world. It would need to facilitate market-based investment to support the energy transition. All this requires a framework of international arrangements and agreed-upon standards that the multilateral institutions are best placed to facilitate.
A China-backed Green Marshall Plan could play a valuable role not only in supporting global green development and stabilising Chinese economic growth. It could also serve as a pillar around which to re-group the multilateral trade and investment regime.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.
The Australian National University
In Brief
A Chinese 'Green Marshall Plan' could facilitate the developing world's energy transition, stabilise China's domestic economy and rally support for the multilateral trading system. But for it to be successfully executed, it will need to be grounded in a multilateral endeavour with support from partners and financial institutions like the International Monetary Fund.
Achieving net zero carbon emissions globally was never going to be easy. It’s been made that much harder and more costly by US President-elect Donald Trump’s promises to withdraw from the Paris Agreement, ramp up US production of carbon fuels and cut American access to low-cost renewable goods and inputs to renewable energy production even further through imposts on foreign trade.
The task of cutting emissions requires reducing the carbon footprint in consumption (for example, via increased use of electric vehicles) as well as in inputs into production (via the sourcing of electricity, the processing of metals and materials manufacture).
Improving energy efficiency is a high priority in reducing the costs of decarbonisation and is best achieved through international trade in the whole range of consumer and producer goods and inputs (such as electric vehicles, solar panels, wind turbines, processed lithium, iron and other minerals) that are necessary to achieve it. Using the strong complementarity in the new energy goods production and supply chains between China and other economies around the world is thus crucial to reducing the costs of the global energy transition.
The energy transition requires a massive transformation in production and consumption around the world over the next few decades. At the heart of that is the electrification of industrial economies with renewable power.
This industrial transformation will need vastly improved access to climate finance, ensuring both that existing funds are properly allocated and that they are utilised in a way that does not undermine climate goals. The global climate finance landscape is growing rapidly, with large amounts of financing now coming from China, but funding amounts are still insufficient to fulfil the Paris Agreement objectives.
There’s a huge gap estimated at US$5 trillion annually in both public and private sustainable financing over the coming decades.
Investment incentives need to align with climate goals. The efficacy of financial markets can be strengthened by harmonising sustainable finance taxonomies across jurisdictions and improving corporate disclosures and data sharing. China and the European Union have worked together on green finance definitions, publishing the Common Ground Taxonomy Table. Singapore has now signed on to an extension of this arrangement, the Multi-Jurisdiction Common Ground Taxonomy.
In this week’s lead article, noting the failure of COP29 to fill the public sustainable finance gap, Yiping Huang proposes that China initiate a Green Marshall Plan to step into the breach, elevating its contribution to investment in a zero carbon future and creating a facility for delivering its new energy technologies to the developing world.
‘China has emerged as an industry leader in the green energy sector over the past few decades, especially in the production of electric vehicles, lithium batteries, wind turbines and solar panels,’ Huang notes.
China is also an acknowledged leader in green development. Its vast supplies and low cost of green energy products are valuable resources for the world’s energy transition. ‘Just like the United States’ Marshall Plan after the Second World War, China can help green development in the Global South by providing both technological assistance and financial support’, he suggests.
The proposed Green Marshall Plan is designed to achieve two immediate goals.
The first is to facilitate the developing world’s energy transition, says Huang. While developed nations currently lack both the willingness and capability to lead global green development, China has advanced technology and vast production capacity that can help.
The second is to stabilise China’s domestic economy. The United States and European Union are raising barriers against Chinese green energy products entering their markets. This could exacerbate China’s domestic overcapacity problem and weaken economic growth if China does not find new markets for its green energy products.
A Chinese Green Marshall Plan initiative could be helpful on two counts: it would add to the pool of funds for green investment in the developing world; properly conceived and carefully executed, it would also help to push back against the intensification of American protectionism and additional costs it imposes upon energy transition, at least beyond those to the United States itself.
To succeed, in the latter purpose in particular however, it would have to be grounded in a multilateral endeavour with sign-on from other partners, like Europe, in its execution, and be facilitated with the help of multilateral financial institutions such as the International Monetary Fund.
Funding under a program of the kind that Huang envisions would be a hybrid package consisting of commercial investment, policy lending and government aid. It would also have to be commercially viable — the increasingly low-cost green energy products produced by China make this a goal that is achievable. In addition to aid provided by governments, especially those of developed nations, national policy banks and multinational institutions would provide low-interest long-term lending to countries in the developing world. It would need to facilitate market-based investment to support the energy transition. All this requires a framework of international arrangements and agreed-upon standards that the multilateral institutions are best placed to facilitate.
A China-backed Green Marshall Plan could play a valuable role not only in supporting global green development and stabilising Chinese economic growth. It could also serve as a pillar around which to re-group the multilateral trade and investment regime.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.
