The Chinese government established the Belt and Road Initiative (BRI) in 2013. Through it, China has invested in nearly 70 countries and international organisations, “to enhance regional connectivity and embrace a brighter future”. The lion’s share of the initiative comprises fossil fuel investments, infrastructure, and large scale industries, most of which are considered high-risk.
The BRI’s investments and lending have raised several concerns. Most investments are shrouded in secrecy, and risk violating procurement and transparency legislation in the countries in which they take place. Extensive lending through the BRI has had a tendency to reduce the manoeuvring room of affected governments.
The BRI also has environmental and climate consequences. A considerable amount of its investments are highly polluting large scale industries, coal-fired power plants and infrastructure projects. Many have been met with global protests, from affected citizens and international decision makers.
In recent years, China has adopted various policy measures in response to such international criticism, including the “Guidance on Promoting a Green Belt and Road” document. This recognises the decision-making challenges faced by Chinese companies and state actors in China’s overseas infrastructure projects, and calls on them to adopt higher environmental and social standards.
Although there has been limited action in the interim, the persistent lack of information disclosure on measures and corresponding implementation, and the economic shock of Covid-19, have stymied these efforts to some extent.
At the same time, the increasing imperative of the “smart mix” of voluntary and legally-binding measures that govern China’s overseas business activities is generating momentum for concrete domestic policy change.
Recent reports about Belt and road initiative
Chinese companies in Serbia
Disgraced in international operations
Chinese companies have invested in production, infrastructure and enterprises in Serbia since 2014. So far, very little is known about the backgrounds and track records of these companies, which have similar operations in other countries.
Just Finance did a global scan, and found reports of severe environmental violations, debarments from international banks, and repeated breaches of national regulations, including accusations of land grabbing.
Coal power in Europe
The debacle of Chinese financed Kostolac B3 coal-fired power station in Serbia
China continues to be the top financier of coal-fired power internationally. Its state-owned enterprises and development banks are constructing and financing many of the world’s new coal projects. This is increasing the risk that countries participating in the Belt and Road Initiative will be locked into high-emissions development pathways.
This overview explains the status of China-backed coal projects in Southeast Europe, and the compliance irregularities that surround them.
How Chinese investments compromise Serbian independence
The Smederevo steel factory, founded in 1913, was bankrupt in 1990s due to the sanctions during the Yugoslav wars. Since 2016 it is operated by HBIS GROUP Serbia and owned the state-owned Chinese iron and steel company Hesteel Group Company Limited – one of the world’s biggest steel producers.
The Smederevo steel mill and a trade port on Danube River cause significant air pollutions and loud disturbing noise. Readings of the air quality near the steel factory showed particle pollution, above the limits in national legislation.
Overview of Chinas coal projects in Europe
|Project name/ Capacity||Status||Loan provider||Chinese State-Owned Enterprise (SOE)||Type of contract||Legal challenge at national court||Irregularities||Environmental permit||Non-judicial compliance review by international organizations|
|Kostolac B2 retrofit||Constructed||China Eximbank||China Machinery Engineering Corporation (CMEC)||EPC||No||The Chinese built desulfurization (DeSox) technology allegedly is not working||Yes|
|Kostolac B3 (350 MW)||Construction temporarily delayed||China Eximbank||China Machinery Engineering Corporation (CMEC)||EPC||Yes||Exemption from public tender (government-to-government agreement signed between China and Serbia) Questionable Environmental Impact Assessment procedure when the expansion of the coal mine was exempted in 2013, before the signing of loan agreement with China in 2014, a decision which appears to conflict with Serbian legislation as well as the EIA Directive required under the EU accession. The Decision is currently subject to an investigation by the Energy Failure to comply with Århus Convention Article 6 (public participation in decision on specific activities) and Article 9 (access to justice) Issuance of construction permits (July 2017) before the completion of public consultation and prior to the completion of the Environmental Impact Assessment Decision was issued (September 2017) as per Serbian Environmental Impact Assessment Law Article 5.||EIA approval No integrated pollution prevention and control (IPPC) permit||The ESPOO Convention Implementation Committee on Environmental Impact Assessment in a Transboundary Context Implementation Committee (Finalized: 2015) Energy Community on EIA Directive 2011/92/EU, Legal case no. ECS-09/18 Serbia, Environment (2018, ongoing) Århus Convention Compliance Committee (Active: March 2020)|
|Kolubara B (350 MW)||MoU signed (2020)||TBC||PowerChina||EPC||No|
|Stanari (300 MW)||Operational||China Development Bank||Dongfang Electric Corporation (DEC)||No||Air pollution||The ESPOO Convention Implementation Committee on Environmental Impact Assessment in a Transboundary Context (Start: 2014, End: 2019)|
|Tuzla (450 MW)||Construction temporarily delayed||China Eximbank||Gezhouba (A subsidiary of China Energy Engineering Corporation, CEEC)||EPC||Yes||State aid: Bosnian state aid in favor of China Eximbank’s loan contravenes with State Aid acquis required for EU accession Environmental Impact Assessment: Violations of Federation of Bosnia and Herzegovina Law on Environmental Protection, Articles 30, 31 and 39 governing public participation and the right of an NGO in the capacity as interested party to initiate legal proceedings and the right to access of information Failure to comply with Århus Convention on access to information and justice Procedural issue, illegal renewal of environmental permit (Cantonal Court of Sarajevo) / Supreme court of Federation of Bosnia and Herzegovina||Yes||The ESPOO Convention Implementation Committee on Environmental Impact Assessment in a Transboundary Context on Strategic Environmental Assessment: planned Tuzla and Banovici coal projects pose a considerable transboundary effect on Croatia and Serbia (Start: 2019, Active: 2020) Energy Community on State Aid: 1. Legal Case ECS-10/18: Bosnia and Herzegovina / State Aid (2018) 2. Dispute 1/2019: Bosnia and Herzegovina (2019); failed mediation. Århus Convention Compliance Committee (Active: March 2020)|
|Banovici (350 MW)||Stalled (MoU signed in 2015 ; announcement for construction to begin in 2017)||No (China Eximbank and ICBC initially considered)||Dongfang Electric Corporation (DEC)||EPC||Yes||Environmental permits proceedings: - Breaches of environment protection legislation – Environmental permit for Banovići TPP ash disposal site (Cantonal Court of Sarajevo) - Procedural issues -environmental permits for TPP Banovići and related hydro accumulation Ramici (Cantonal Court of Sarajevo / Supreme court of Federation of Bosnia and Herzegovina) Allegations on irregular tender process (Dongfang picked to be the winner prior to the conclusion of the tender procedure)||Yes, although the construction permit was refused in December 2017||The ESPOO Convention Implementation Committee on Environmental Impact Assessment in a Transboundary Context on Strategic Environmental Assessment: planned Tuzla and Banovici pose a considerable transboundary effect on Croatia and Serbia (Start: 2017, Active: 2020) Århus Convention Compliance Committee (Active: March 2020)|
|Ugljevik 3 (2 x 325 MW)||Stalled||No||No||EPC||No||Failure to comply with the provisions of EU’s Environmental Impact Assessment Directive||No||Energy Community on Environmental Impact Assessment, Legal Case ECS-01/15: Bosnia and Herzegovina/ Environment (2017) The ESPOO Convention Implementation Committee on Environmental Impact Assessment in a Transboundary Context (Ongoing: 2017)|
|Kamengrad (2 x 215 MW)||MoU signed (2017)||No||China Energy Engineering Corporation||EPC||No||No||No||No|
|Kakanj 8 (2 x 300 MW)||MoU signed, stalled||No||No||Yes||Procedural issue, illegal renewal of environmental permit (Cantonal court Sarajevo)||Yes|
|Gacko 2 (350 MW)||MoU signed (2017) , stalled||China Machinery Engineering Corporation||Joint Venture|
|Kolubara B||An agreement signed.||Not disclosed although reports point to a EUR 385 million investment.||Power China||Not disclosed||TBC||Power China signed the agreement – whatever form it may be - in the absence of any valid permit for the project.||The spatial plan is in public consultation as of July 2020.||TBC|
|Pljevlja II (254 MW)||Agreement for retrofitting existing plant signed in March 2020.||Not disclosed.||Dongfang Electric Corporation||Not disclosed.||TBC||TBC||For the planned and now cancelled Pljevlja II project, Montenegrin NGO filed a lawsuit requesting the cancellation of the environmental approval citing citing a wide range of possible compliance violations ||TBC|