A green balance sheet for Shanghai Spirit

Bishkek's 20-GW renewable cooperation target is credible if the SCO tackles the less visible obstacles: standards, project preparation and the cost of capital

At the Shanghai Cooperation Organization Bishkek Summit on Sept 1, leaders approved 28 documents. Among them was the commitment that China would continue working with other SCO countries to add 10 million kilowatts of solar photovoltaic capacity and the same amount of wind capacity. China also pledged to jointly implement 100 technological cooperation projects over the next three years. In other words, the target comprises 10 GW of solar photovoltaic and 10 GW of wind power, totaling 20 GW. Manufacturing the required equipment is technologically feasible. Financing sound projects across countries with very different markets and institutions will be more difficult.

The Bishkek Summit did not invent an economic agenda for the SCO, but it gave that agenda greater weight. Development was placed at the center of the discussion, alongside proposals for cooperation in green industry and green mining. This makes sense for a group that includes energy producers and consumers, manufacturing centers, mineral-rich economies and major transit states. The combination gives the SCO an unusual degree of internal complementarity. The question is whether it can connect those assets rather than simply increase trade in equipment.

This question matters for both regional security and economic growth. The World Bank warns that, without action, surface-water availability in parts of Europe and Central Asia could fall by half by 2050, while water demand could rise by as much as 51 percent. It identifies Central Asia as one of the regions most exposed to future water stress. Droughts, floods and other extreme events can hit hydropower, agriculture, cities and industry at the same time. Electricity demand across Central Asia is also projected to triple by 2050 under a business-as-usual scenario. In these circumstances, energy security depends on diversified generation, stronger grids and more efficient use of water — not only on access to fuel.

There is a credible economic basis for cooperation. China is the leading supplier across most clean-energy technology supply chains. The International Energy Agency estimates that China accounts for 85 percent of solar and 80 percent of lithium-ion battery supply-chain production capacity. Central Asia has abundant but underused energy resources, yet cross-border electricity trade meets only about 3 percent of regional demand and variable renewables provide just 4 percent of generation in Central Asia. Better connections could allow renewable power to support cleaner mining and manufacturing, while cross-border grids can help manage seasonal shortages. Greener transport corridors could also reduce trade costs and emissions.

The obstacle is that technical potential does not automatically attract affordable capital. According to the IEA, emerging and developing economies outside China account for nearly two-thirds of the world’s population, but received only 27 percent of total energy investment and 18 percent of clean-energy spending in 2025. For a typical utility-scale solar project, the cost of capital in key emerging economies can be two or three times higher than that in advanced economies or China. Currency mismatches, unfamiliar contracts and high preparation costs can stop an otherwise viable solar plant or transmission line from reaching financial close. Additional funding alone will not resolve this issue. The financing has to reflect the risks that developers and lenders actually face. Before capital can flow efficiently, however, SCO countries must first agree on a common language for what qualifies as green.

This begins with definitions. SCO countries need neither identical financial regulations nor a single green taxonomy. They do, however, need enough compatibility for a bank in one country to assess a project or bond issued in another. Common minimum principles for emissions measurement, environmental safeguards, climate-risk disclosure and the traceability of green-mining projects would cut due-diligence costs and make greenwashing harder. Limited mutual recognition among national taxonomies could start with renewable power, grids, storage, energy efficiency and water resilience. A joint SCO working group could develop this initial list and propose a timetable for recognition.

Definitions will matter only if they lead to investable projects. The SCO’s Interbank Consortium was created in 2005 to finance joint investment and infrastructure and to develop instruments for economic cooperation. It could host a modest green project facility that pays for feasibility studies, environmental assessments, standard contracts and early engineering. Once projects are prepared, national development banks, multilateral lenders and private investors can divide the risks among themselves. Guarantees, blended-finance tranches and local-currency loans would be especially useful where commercial banks cannot carry those risks alone. In April, the United Nations Development Programme likewise emphasized the need for Central Asia to build a steady pipeline of investment-ready climate projects. The institutional foundations therefore exist; they need to be connected and used more effectively. Such mechanisms are necessary, but they should be flexible enough to support both large cross-border systems and smaller local projects.

The unit of financing should also be larger than a single plant or rail link. The summit highlighted connectivity, energy and industry, and China called for better performance from the Trans-Caspian International Transport Route. Making such a corridor green would require clean power along the route, modern grids and storage, efficient ports and border facilities, and credible measurement of the emissions embedded in traded goods. Green mining poses a similar test. The IEA argues that secure mineral supply chains must also be sustainable and responsible, with transparent treatment of emissions, water, waste, workers and communities. Otherwise, lower emissions at one stage may simply displace environmental costs to another.

Scale should not exclude smaller economies, local governments or private companies. Many have viable projects that are too small to interest international financiers on their own. Rooftop solar, irrigation upgrades, municipal efficiency and small storage projects can be bundled into standardized portfolios. The 100 planned technology projects should also include technical training, local suppliers and transparent benefit-sharing. People are more likely to support a transition they can see in jobs, services and energy bills, rather than only in national capacity statistics.

The SCO need not become a regulatory union. Its useful role is to bring different systems to the same table, identify the frictions that hold up cross-border investment and agree on workable solutions. A small set of pilot projects would be a sensible start. Each should use common disclosure templates and publish results on capital mobilized, emissions avoided and local benefits delivered. Successful projects can be scaled up; underperforming ones should be adjusted, not retained for prestige.

Leaders of the SCO member states signed and issued the Bishkek Declaration on the 25th Anniversary of the SCO and adopted 28 outcome documents covering security, economic, people-to-people and cultural cooperation, as well as organizational development. The test after Bishkek is whether member states can reduce financing frictions, develop credible projects and deliver measurable results. If they succeed, the 20-GW figure will mean more than additional generating capacity. Success will translate the Shanghai Spirit into tangible investment decisions and cleaner, more resilient growth across Eurasia.

The author is a researcher at the Academy of Financial Research at Zhejiang University and an assistant professor at Zhejiang University International Business School.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.