The implications of China’s 'green diplomacy' for Chile

China has been upping its investments in Chile over the past few years, especially in areas key for the green transition such as renewable energies, lithium and electromobility.

The approach is part of Beijing’s so-called green diplomacy in which it seeks strategic partnerships in the market for minerals related to clean energy, such as lithium and copper, which reached US$320bn in 2022, according to Alex Wang, professor of law and faculty co-director of the Emmett Institute on Climate Change and the Environment at the University of California, Los Angeles (UCLA).

Following a presentation on China’s climate change and industrial policies at an event hosted by Universidad Adolfo Ibáñez in Santiago, Wang spoke with BNamericas about how China’s green policies are shaping its investments in Chile, and how this could also play into Beijing’s economic rivalry with the United States.

BNamericas: You said in your exposition that the consensus was that the US wouldn’t take action unless China did. Would a more aggressive move from Washington on climate have economic implications for Latin America? 

Wang: The current moves on climate change are investment and industrial policy oriented. The rhetoric is about reshoring and friendshoring. The latter would obviously be an opportunity for countries that have a close relationship with the United States. But then the details are what's important. Will the US subsidies pull investment away?

That’s a discussion the US needs to have, because there needs to be a balance with friendly countries.

BNamericas: You did list some of China’s ventures in Chile’s market such as energy and mining. China has also made incursions into Chile’s infrastructure market, which include hospitals, highways, trains and at least one water reservoir. How do these investments play into China’s green diplomacy?

Wang: Mining, energy and electromobility are relevant for green diplomacy because of their relation to the green transition in general. 

In the case of traditional infrastructure, China was motivated to move towards a greening of their own investment because of criticisms of the environmental harm of projects such as hydro-dams and roads on biodiversity. China certainly needs to regulate its companies as they have negative impacts on the construction of basic infrastructure as well.

BNamericas: There’s high demand for energy transition minerals, but there are also concerns about the effect of such industries on the environment, such as in the case of lithium. How does China plan to get around environmental and social demands abroad that are expected to become even stronger?

Wang: Mining has always been a sector with high environmental concerns and now we’re including it in the green transition because the materials it produces are so relevant for the energy transition.

The brine method used in Chile for lithium may have fewer problems than traditional rock mining, but it also has water problems. And, therefore, technology development, transparency and tracing will be needed.

In that scenario Chile has an advantage in relation to other Latin American countries since it has stronger institutions.

BNamericas: Chile is currently on a legislative push to cut red tape regarding permitting procedures for projects, which includes a reform to streamline environmental evaluation. Given that you stated that the US tends to see environmental law as an obstacle to investment, do you believe Chile can prove the opposite?

Wang: That paradigm is something the entire world is grappling with. The world is trying to figure out how to have environmental laws that encourage the things we want and discourage things we don’t want.

That same permitting discussion is taking place in California as well, and I believe Chile does have an opportunity. If they can do that well, that means setting up institutions without having them delay or adding too much cost for investments.

BNamericas: Chile is currently trying to get its green hydrogen sector up and running as quickly as possible. Do you believe China will be interested in participating as well?

Wang: I think so, and I believe that green hydrogen seems like a wonderful opportunity because, among other reasons, we don’t really have a large green industry right now. China still has a substantial amount of industries that it needs to green and a partnership with Chile can be important.

But Chile will also need to diversify its partners and look towards the US and Europe as well.

BNamericas: What other opportunities for green development can you see in Chile?

Wang: If Chile can continue greening its electricity sector it can become a global model in that regard. It has such great natural resources and it needs to show it can take advantage of them in an effective way.

BNamericas: You opened your talk saying that we’re in a conjunction of geopolitics and climate change. What kind of player is Chile in this scenario?

Wang: I think Chile is right now particularly important as a key source of minerals needed for green energy, such as copper and lithium, and is also a key player by showing to the rest of the world how you transition to a low carbon economy.