Amidst the novelty of world leaders working from home at the first-ever virtual United Nations General Assembly (UNGA) session in September, Chinese president Xi Jinping dominated headlines when he announced China’s commitment to carbon neutrality by 2060. In the official translation, Xi Jinping specifically pledged “to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060.” To say that ears perked up at the UNGA session and around the world would be an understatement given China’s current title as the top greenhouse gas-producing country in the world, the pledge’s short time horizon, and the collective disillusionment around global climate action after the United States’ recent withdrawal from the Paris Accords. In short, the announcement by Xi Jinping marked a galvanizing moment for the international climate movement and will be a critical point for the trajectory of global warming.
In the months since, however, many questions have emerged regarding how China plans to achieve the goal of carbon neutrality by 2060, and perhaps most pointedly, what exactly “achieve carbon neutrality before 2060” means. On one dimension, many have differentiated between the goal of being “carbon neutral” and the goal of “climate neutral” – the difference being that “climate neutral,” or “net-zero,” refers to all greenhouse gases while “carbon neutral” refers to curbing and recapturing only carbon dioxide emissions. As such, China’s goal of carbon neutrality is a weaker commitment than climate neutrality. On another dimension, many have asked if China’s commitment refers only to domestic emissions or if it also includes exported emissions from Chinese construction, financing, and initiatives abroad. By no means should we begin to question the seriousness of China’s pledge, but with no concrete policies so far and a dearth of supporting messages from China, the policy community is left to perform guesswork about the feasibility and ambition of China’s commitments. If China is serious about global warming though, China’s pledge to become “carbon neutral by 2060” should apply to its international efforts with the country being the largest financier of carbon emissions abroad. In the next few decades, on-lookers should pay attention to three key issue areas at the international level, and if China integrates them into its carbon neutrality plan, to assess China’s progress towards carbon neutrality by 2060.
The first domain in which China emits carbon dioxide internationally is in the Belt and Road Initiative (BRI). Despite being initially promoted back in 2013 as a green initiative and environmentally-sound, the BRI has widely been deemed an exacerbating force in climate change. On a basic level, the BRI’s infrastructure and industrial projects use immense amounts of fossil fuels to build and maintain especially as many of them are in underdeveloped regions with little to no existing renewable energy infrastructure . In parallel, the BRI generates a heavy demand for processed resources used in construction, such as steel, which entrenches and grows such industries both in China and local countries still primarily powered by coal. Many of the projects, especially those constructing roads and railways, also lead to immense amounts of deforestation and the destruction of natural carbon sinks, such as peatlands . The destruction of natural carbon sinks releases preserved carbon dioxide back into the atmosphere and reduces the ability of habitats to perform carbon sequestration . The BRI also directly supports coal power plant construction abroad through “overseas project contracting, equipment exportation, outward investment, and bank loans” . Just between 2015 and the end of 2016, Chinese policy-banks have funded and Chinese construction firms have built over 240 coal-plant projects in BRI countries such as Egypt and Pakistan . There is a collective consensus that the BRI will be a critical limiting factor for many countries, especially the underdeveloped countries, in reaching their 2-Degree Scenarios benchmarks set in the Paris Accords. Even if the rest of the world is on track to meet its benchmarks, the BRI’s projects in recipient countries still set the world on a path to warm 2.7 degrees by 2050.
The second domain through which China contributes to carbon emissions internationally is through its energy financing. There are two main ways that China finances carbon emissions abroad. The first involves domestic policy banks dedicated to lending in support of government initiatives. Between 2013 and 2019, China’s two main policy banks, the Chinese Development Bank and the Export-Import Bank of China, invested in coal more than any other form of energy . Currently, more than 210 million metric tons of carbon dioxide emissions are released annually due to the policy banks’ investments into coal . For context, that’s what four New York Cities would emit in a year. Since 2009, the Chinese Development Bank has also contributed over $80 billion to oil projects around the globe, such as in Russia, Brazil, and Angola, ranging from financings oil rigs, pipelines, supply contracts, and processing plants. The second financing mechanism are Chinese companies. Chinese companies, such as the Huaneng Group and CLP Holdings, have been investing in overseas power projects since 2003 with over 50% of their total investments being dedicated to coal or gas projects . Examples of these projects include building oil pipelines in Iraq, purchasing a Russian oil corporation, and developing oilfields in Thailand . Chinese companies have also been investing in European energy assets with one notable example being the China Three Gorges Company buying 21% of stakes in the Portuguese national power grid in 2011, much of which still runs on gas. Moreover, China also indirectly finances many projects that emit significant amounts of carbon dioxide through the Asian Infrastructure Investment Bank where about 54% of its energy portfolio is dedicated to fossil fuel investments.
In addition to curbing emissions in the BRI and divesting from carbon dioxide emitting projects, the third domain where China will need to make serious progress in order to reduce its international carbon footprint is simply in its enforcement of environmental laws and regulations abroad. Chinese companies operating abroad are known to blatantly flout both China’s own environmental regulations and the limited number of regulations of underdeveloped countries they typically operate in. This takes many forms with firms simply ignoring requirements to conduct environmental assessments or bribing officials to circumvent regulations . For example, one Chinese firm building power plants in Laos was caught lifting the environmental report of another firm and submitted it as their own in 2019. Another project in Indonesia was halted in 2016 because of the project’s failure to produce environmental impact studies. These practices stretch as far back as 2007 with numerous examples of Chinese companies violating local environmental laws and cooperating with corrupt officials to exploit minerals in African countries . China does technically extend certain environmental regulations to its firms operating abroad, however, it’s showed a continuous reluctance to enforce penalties for violations while underdeveloped countries that Chinese firms typically operate in simply don’t have the institutional power to do so . Moreover, because Chinese firms operating abroad are so economically profitable, both China and the local countries have an incentive not to enforce penalties to avoid damaging profit margins and driving away the companies. How effectively China implements and enforces environmental regulations in its BRI projects and energy investments will ultimately underpin its progress to carbon neutrality.
If China is serious about becoming a world leader in climate action, it should be making progress in decreasing both its domestic and international carbon footprint. In other words, Xi Jinping’s promise of carbon-neutrality by 2060 should be applied to Chinese carbon emissions both at home and abroad. Doing so will have drastic implications on how well the world curbs global warming in the next few decades. It will be in the three key issue areas discussed above that observers will be able to assess China’s commitment to decarbonization abroad. Ultimately, efforts to curb emissions generated by the BRI, divest from coal and oil assets abroad, and truly enforce environmental regulations for Chinese companies operating abroad must be implemented in tandem to achieve the 2060 pledge.
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