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Enhancing the Image: Chinese Renewable Energy Investment in OECD Europe

Between 2011 and 2017, China’s investment in renewable energy abroad rose dramatically, with its top target developed countries in Europe. While energy investment could simply be a profit-driven endeavor,China’s increasing investment in renewable energy in OECD countries in Europe is a distinctly political act to enhance the image of China as a responsible actor on the international stage.

China’s investment in energy takes a variety of forms and methods. Since 2012, 26% of Chinese greenfield, or bottom up investments, relate to renewable energy. Meanwhile, 45% of mergers and acquisitions were related to renewable energy and 30% of mixed investments were in the renewable sector.  China’s rapid prioritization of renewable energy signals an increase in both the global importance and the geopolitical benefits of investing in clean energy sources.

Beijing’s renewable energy investments specifically target OECD member countries in Europe rather than developing countries to enhance its image and maximize its political capital. From 2010 to 2017, China invested $3.6 billion in renewable energy in Germany while the largest non-OECD recipient, Pakistan, received only $1.6 billion. Furthermore, Chinese outbound EU investments in wind energy totaled $6.8 billion. In Scotland, China is building the Moray East Wind Farm, the largest offshore wind farm in the world.Beijing’s investments target OECD countries that prioritize renewable energy through policy incentives and subsidies. By intentionally directing efforts towards these countries, Beijing increases the likelihood that its projects will succeed in operations in the long run, and thus leave a greater perception of Beijing’s reliability and responsibility. If China’s investments were solely profit-seeking, it would primarily direct funds towards countries in which China has already established strong investment infrastructure.

Chinese renewable energy projects in OECD Europe serve as a useful cover for continuing highly profitable fossil fuel technology investment in developing countries. China’s coal power investment in Southeast Asia was estimated to be $12 billion from 2003 to 2017, and is a significant portion of total outbound energy investment due to domestic decarbonization leading to falling demand. These investments typically go uncovered in international media, giving China more leeway to pursue them. On the other hand, China’s new wind farm in Sweden was greeted with positive acclaim, and China was named a key driver of Europe’s energy transformation. By utilizing renewable energy investments in Europe to balance out its current strategy in developing countries, China is able to portray itself as a responsible actor while Chinese corporations simultaneously make a quick buck.

Outbound renewable energy investment also increases China’s leverage at international conferences and gatherings, allowing it to take part in major decisions and initiatives. Investing in renewable energy projects abroad contributed to China’s rise in status at the annual Conference of Parties (COP), a major gathering of nations to address climate change. China’s leveraging power at the COP reversed from “holding the world ransom… [to] being an indispensable party” in the last decade, especially in the eyes of representatives from OECD Europe. The perceptual shift of Chinese climate leadership is accompanied by tangible results like the NGO Twinning Program, a partnership between Brussels and Beijing to set and coordinate policy agendas.The OECD European countries that hold positions of power in these gatherings are targets for China’s renewable energy investment and acknowledge the importance of Beijing at the table.

China’s growing investment in renewable energy abroad is also looked at as a replacement for the withdrawal of the United States from global climate leadership. China’s rapid rise in investment matches the pace of American cutbacks, and portrays China as a willing and responsible partner to OECD Europe. China was welcomed with open arms to replace Washington’s leading role at the Major Economic Forum, where momentum is maintained by OECD countries to achieve climate goals.

Increased Chinese control over the investments has driven some OECD European nations to respond negatively to Chinese investment. However, this is only a setback in the face of a decade-long strategy that will continue to work. By targeting certain countries, redirecting focus to positive actions, using its leverage at international gatherings, and replacing American leadership, Chinese outbound renewable investment in OECD Europe is enhancing China’s image as a responsible actor. Pursuing positive geopolitical effects generated from socially responsible achievements is a trademark tactic of China’s rise, and renewable energy is a key manifestation of that tactic.

Kedar Pandya co-authored this article with Benjamin Zimmerman. Kedar is an undergraduate History and Political Science double major at Texas A&M University where he focuses on Asian security and Chinese interests in East Asia and India. This article is a part of a broader effort to analyze Chinese economic statecraft at the Bush School of Government.

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Benjamin Zimmer

Benjamin is a Master of International Affairs student at The Bush School of Government at Texas A&M University where he focuses on East Asia and intelligence. He is the creator of The Korea Page: News and Analysis from the Korean Peninsula. His research interests include North Korean politics, the North Korea-United States relationship, and nuclear proliferation. His writings have appeared in The Peninsula Report, Foreign Policy Press, and The Sphere. He can be found on twitter at @bzimmer8.
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