China’s state-led investment in clean energy is now the main determining factor in how quickly the world decarbonises, according to a report by London-based think tank Ember.
“Within China there is a realisation that the old development paradigm centred on fossil fuels has run its course, and is not fit for 21st century realities,” says the report, published on Tuesday. “The government’s aim to establish an ‘ecological civilisation,’ which simultaneously delivers on economic, social and environmental goals, is the response, embedded in the Constitution since 2018.”
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China produces 60 percent of global wind turbines and 80 percent of global solar panels, driving cost reductions for everyone else, Ember’s Sam Butler-Sloss told Al Jazeera.
“Since 2010, the cost of solar modules has come down over 90 percent … and China has been responsible for three quarters of the cumulative solar manufacturing in that period,” she said.
“Now, we’re at a point where solar modules are sub-10 cents per watt. Batteries are coming in at sub-$70 per kilowatt hour. And this is enough … to profoundly change the economics of energy around the world.”
China’s decisions were partly driven by economic realities, according to the report.
Its vast manufacturing industry consumes energy, much of which it imports in the form of oil and gas. China sought to remain competitive and energy-secure by becoming autonomous.
That brought a powerful added benefit. Beijing has financed a domestic market for electric technologies and invested in a growing patent gap with the rest of the world.
In 2020, it was responsible for 5 percent of global energy patent applications. That figure is now 75 percent.
In bringing about this transformation, it is becoming the hub of a global market supply chain.
“Today, in solar and batteries, China’s manufacturing capacity is greater than global demand,” said Butler-Sloss. Unlike China’s overinvestment in real estate in the last decade, which harmed parts of its financial system, she believes this bet is a winner because batteries and solar panels can be exported.
“You get some people using language, like oversupply. I think the uptake market is more dynamic and responsive, and we’re seeing that oversupply meets these emerging markets,” she said.
China yet to tackle greenhouse gas emissions
China helped ensure this uptake by investing beyond its borders.
“Chinese battery and [electric vehicle] firms have invested about $80bn in facilities in emerging markets and around the world. And this is the technology, know-how, and the finance to build up these industries … in different countries,” she said.
Last year, China invested almost a third of the global total in renewable energy capacity – $625bn, while Europe invested $426bn and the US $409bn. Its return was triple the investment.
China’s clean energy sector – led by the “new three” industries of solar panels, batteries and electric vehicles – expanded three times faster than the rest of the economy, adding $1.9 trillion to China’s output.
The US and Europe have watched on with alarm because China’s state-subsidised industries have undercut everyone else’s.
When dedicating hundreds of billions of dollars to the rollout of solar and wind energy in his Inflation Reduction Act, Joe Biden, the former US president, marked that money strictly for investments on US soil.
Even so, said Ember’s lead on the report, Biden was still benefitting from Beijing because its investment stimulated other countries to develop.
“If China had not made these investments, then where would we be now?” said editor Richard Black. “Would we have seen the same scale of investments in any particular country or region?”
“My own personal opinion is probably that we wouldn’t have done,” Black said. “The Chinese government, in collaboration with the major companies, realised some time ago that there was going to be an enormous export market here and invested accordingly in a strategic way, bringing together deployment policies … manufacturing policies and export policies. And I’ve never really seen any other country trying to do that.”
Europe remains competitive on some metrics. For example, whereas electricity accounts for a third of China’s energy mix versus one-quarter in Europe, Europe’s electricity is cleaner, with three in 10 gigawatts coming from renewables, compared with China’s two in every 10.
And for all its investment, China has yet to show a reduction in its greenhouse gas emissions, which is, after all, the main objective of the energy transition. According to the International Energy Agency, emissions from the European Union and the US have been falling since the turn of the century.
China’s and India’s emissions last year were the main drivers of growth to a new record of 37.8 gigatonnes of carbon dioxide (CO2)-equivalent, with China’s accounting for almost a third of that.