As the long American presidential election campaign begins in earnest, the U.S. Congress remains fractured between progressive Democrats pushing what they describe as a "Green New Deal" to battle climate change and Republicans championing increased security spending to address rising Chinese power.
Imagine if the two agendas were merged. Rather than a national Green New Deal, playing off the vast public works program launched by President Franklin Roosevelt in the 1930s, a Development Green New Deal would see the U.S. support projects to curb carbon emissions in emerging economies in Asia and elsewhere. These countries happen to be where China is pouring in resources to build infrastructure, mostly under the umbrella of its Belt and Road Initiative.
Even though some estimates put the cost of the Green New Deal plan at as much as $10 trillion, its ambitious program of remaking the U.S. economy would have far less impact on global carbon dioxide levels than comparable spending in Asia.
Despite its reputation as an environmental laggard, U.S. carbon emissions actually fell 14% between 2005 and 2016. Global emissions, however, grew 59% over the period, with those of India up 101%. Vietnam, Bangladesh, China and Indonesia posted similar increases. Just the growth in Indian emissions over 2015 and 2016 more than offset the decline in America's.
There is no mystery about this. Much of Asia, home to half of the world's population, is experiencing much faster economic growth than the U.S. while relying more heavily on coal-fired power.
Yet Asia is rich in renewable energy resources like sunlight and wind. Across large swathes of Asia as well as Africa, the energy grid is barely extant so Development Green New Deal investment could set the direction of development in a climate-friendly direction.
Whether one accepts the reality of climate change or not, we can all agree that solar panels could provide an efficient option in tropical nations requiring significant new generating capacity. Falling panel prices have brought down project costs to under 3 cents per kilowatt hour in some countries. At such prices, renewable energy is competitive with traditional power.
Idealistic as the notion of a Development Green New Deal may sound, it would dovetail with bipartisan concern about rising Chinese influence across Asia and Africa and provide a meaningful alternative to Beijing's BRI.
The U.S. cannot afford to continue its general benign neglect of developing Asian and African countries. The Republicans and Democrats have occasionally in the past recognized their common need to address this, such as when they united behind creating new trade preferences through the African Growth and Opportunity Act in 2000.
If Washington does not nurture relationships with emerging Asian and African economies, it will remain at a disadvantage as Chinese resources flood in. The U.S. has to do more than just hope countries refuse shiny new Chinese infrastructure projects for which the bills will have to be paid later.
The U.S. can leverage its world-leading capital markets. The private sector is typically reluctant to invest in infrastructure assets in emerging markets due to long payback periods and abnormal risks. The government in power when a project is completed may not fully honor the contract signed by its predecessors while the nation's currency could undergo wild swings over the long construction period.
These are risks that Washington can help address in backstopping private investors, much as it does now via guarantees and insurance for exporters via the Export-Import Bank of the U.S. The government could also offer concessional lending to push down interest rates to make Asian green energy projects more financially feasible. Hedging tools could reduce the risk of default in case of large currency swings.
Consider the case of a U.S. group bidding to set up a solar panel farm in Vietnam that would operate for 20 years. Development Green New Deal assistance could provide a currency swap that would give the developer, owed payment in Vietnamese dong, the right to collect dollars from the U.S. government if the currency depreciated beyond a certain threshold, say 20%. The risk of such a swing in a small, volatile market like Vietnam is a key obstacle to bringing this type of project to fruition.
The program could also back a water recycling plant for drought-afflicted India. If the operations met good governance and sustainability standards, Washington could allot funds to retire part of the debt owed to investors.
Corruption is another endemic problem with infrastructural development in emerging markets, as seen with Belt and Road projects in places like Sri Lanka, Venezuela, the Maldives, and Malaysia. Under the Development Green New Deal, debt relief could be offered for specific, well-managed green projects that meet sustainability and financial targets.
This New Deal could be funded for less than $10 trillion. By limiting funding to covering specific and limited risks like currency swings for private investors in designated frontier market projects, the U.S. government could spend comparatively little while enabling much greater investment. In fact, $1 trillion in risk management funding could catalyze $10 trillion in green investment flows to the fastest growing and most vulnerable economies in Asia and Africa.
Officially, China has said it welcomes additional investment from other countries into nations participating in the BRI. Unofficially, Beijing would likely see the Development Green New Deal as a challenge if it catalyzes project investment in countries targeted heavily by Chinese investors. While this would probably not lead Beijing to raise its own investment level given growing financial constraints, officials would likely pressure recipient countries against accepting U.S. investment.
Barring a major unexpected swing in the partisan makeup of the U.S. Congress, there is almost no chance that a domestically focused Green New Deal can be passed.
There is, however, bipartisan agreement about the importance of working with other countries to address the challenge of China's rising assertiveness. Congress' U.S.-China Economic and Security Review Commission last November recommended that the government should offer funding to developing economies in Asia and elsewhere for energy and infrastructure projects as an alternative to Chinese support. Moreover, a Development Green New Deal could leverage American capital markets and make a major contribution to controlling carbon emissions.
It would also allow each political party to address its priorities and constituencies. Republicans could show they are investing in promising new technologies and helping American business while limiting public involvement. Democrats can realize their objective of a major environmental initiative while showing the value of international cooperation. In Beijing's terms, it would be a win-win result.
Christopher Balding is an associate professor at Fulbright University Vietnam in Ho Chi Minh City.