This week's long read about China and renewables.

[SteamyTea]

Environment

Why China’s clean energy tech will determine our climate future

China is both the world’s biggest carbon emitter and the largest producer of clean energy tech. Its choices in navigating this paradoxical role may determine the future of the entire planet

4 October 2023

By James Dinneen

China’s energy use makes it the world’s largest carbon emitter

Tony Shi Photography/Getty Images

There is a question frequently repeated by sceptics of plans to cut greenhouse gas emissions in Western nations: what about China? This simplistic refrain asks the right question for the wrong reasons. That is because China plays a paradoxical role in the global picture of climate change. It is now by far the largest emitter of greenhouse gases, annually pumping out more than the combined emissions of the 38 states in the OECD group of advanced economies. It is also the world’s largest builder and supplier of clean energy technologies that are key to cutting those emissions.

As the transition away from fossil fuels proceeds, the Chinese government has increasingly used this status for geopolitical leverage, positioning the country to play an ever more dominant role in the 21st century and shaping global progress on climate change – for better or worse.

Its path to becoming a green superpower has multiple stages, starting with the energy transition within its own borders. “The scale of clean energy investment is without parallel,” says Lauri Myllyvirta at the Centre for Research on Energy and Clean Air in Finland. “We exhausted all superlatives a couple of years ago.”

In 2023, which will be a record year for global development of renewable energy, more than half of all new wind and solar capacity is set to be installed in China. It is also adding more new nuclear power and hydropower than anywhere else, and in August overtook Europe as the largest builder of offshore wind. In June, two years ahead of schedule, fossil fuels made up less than half of China’s electricity generating capacity, though coal remains a big and growing part of its energy mix (see “The coal question”, below).

China boasts record adoption of electric vehicles too, with these making up more than a fifth of all new vehicles sold in China in 2022, as well as the world’s largest high-speed train system. A general economic malaise has also created a “tail wind” for its emissions reductions, says Myllyvirta.

All of this gives observers confidence that China will, at the very least, be able to meet its near-term target of reaching peak carbon dioxide emissions by 2030 or earlier. “Those are going to be snowballs rolling by themselves,” says Li Shuo at Greenpeace East Asia. One report from Norwegian research firm Rystad Energy has even projected that China’s emissions from burning fossil fuels could peak as soon as this year, and fall 10 per cent by 2030.

By aggressively growing its own clean energy, China has also reduced costs everywhere else. “They’ve done the world a huge favour,” says Philip Andrews-Speed at the Oxford Institute for Energy Studies, UK. It is largely thanks to those falling costs that new onshore wind and solar facilities are now more cost effective than new fossil fuel capacity in much of the world. That, in turn, has made China the dominant supplier of much of the world’s solar panels, wind turbine parts, batteries and the minerals with which all of these are made.

A panda-shaped solar farm in Shanxi province, China

Visual China Group via Getty Images

For instance, China now makes at least 80 per cent of the world’s solar panels and counting. The first half of this year saw panel exports from China increase by more than a third compared with the same period in 2022, according to a report from UK energy think tank Ember, to a total of 114 gigawatts of generating capacity – equivalent to all the solar capacity currently installed in the US.

Overseas investment

In addition, China has increasingly invested directly in clean energy overseas. Since the launch of its Belt and Road Initiative in 2013, it has spent just over $1 trillion on various infrastructure projects in nearly 150 countries, including hundreds of billions for oil and gas or coal-related projects. But the nation now appears to be greening these investments. According to a recent report from researchers at Fudan University in Shanghai, China, around half of the $12.3 billion the country has spent on foreign energy in 2023 went to clean energy, ranging from hydropower in Pakistan to a giant floating solar farm in Zimbabwe. Although the overall amount was lower than previous years, that makes China’s outlays this year the greenest of the past decade.

China’s green power influence is particularly being felt in lower-income countries. For instance, it recently signed an agreement with South Africa to supply it with more solar panels as well as upgrade an ageing nuclear plant and coal plant. According to Ember, while China exports most of its solar panels to Europe, sales to Africa have increased this year by nearly 200 per cent and exports to the Middle East jumped 64 per cent. A notable exception was a 76 per cent decline in exports to India, which has prioritised its own domestic solar manufacturing.

China also has a growing role in directly financing environmental efforts in lower-income nations, beyond spending through the Belt and Road Initiative. In 2016, it pledged $3.1 billion for climate-related projects in such places, though according to a report from climate think tank E3G, it has delivered just 10 per cent of that so far. Calls for more spending by China – which hasn’t joined other large economies in committing to contribute to a $100 billion fund to pay for climate-related “loss and damage” – are expected at the upcoming COP28 climate summit.

China’s clean energy dominance has spurred its competitors to try to catch up. In the US, the Biden administration’s Inflation Reduction Act, which put hundreds of billions of dollars towards clean energy development, was shaped by a desire to establish domestic industries that are less dependent on China.

One reason for doing so is concern about embargoes on key technologies or materials, such as China’s recently enacted export restrictions on gallium and germanium, two key minerals for advanced electronics. This type of manoeuvre has invited energy experts to make comparisons with the powerful oil exporters of OPEC, who can influence the global economy by deciding to produce more or less oil.

Mineral influence

“In this critical minerals context, we are up against a dominant supplier that is willing to weaponise market power for political gain,” said US energy secretary Jennifer Granholm at an International Energy Agency meeting on 28 September, in comments widely interpreted as a reference to China’s dominance.

But Edmund Downie at Princeton University says that control of clean energy supply chains wouldn’t offer as much geopolitical leverage as control of oil. Unlike an oil embargo, export controls on clean energy technology or minerals wouldn’t be felt immediately in the same way as fuel pumps drying up, and other countries would have more time to respond by expanding their own manufacturing capacity. Unlike OPEC, China is also the main consumer of all the clean technology it makes.

But unease about China’s clean power dominance is exacerbated by the nation’s slower targets on cutting emissions relative to Western countries, a key source of the “What about China?” sentiment. While the US and the European Union have pledged to substantially cut emissions by 2030, China is aiming only to peak emissions by 2030 and achieve carbon neutrality by 2060. China’s leaders have said the country’s official status at the UN as a “developing” nation, as well as its smaller share of historical emissions, justifies the delayed cuts – its per-capita emissions are also lower than those in some other leading economies.

China’s Baihetan dam is the world’s second largest hydropower plant

Orientfootage/Getty Images

But many have argued China could move faster. US climate envoy John Kerry did just that during a visit to Beijing in July to discuss how the two superpowers might work together on climate change despite growing hostilities. During the visit, China’s president, Xi Jinping, said in a pointed speech that the country’s path to decarbonise “must be determined by ourselves, and will never be influenced by others”.

A major sticking point is China’s ongoing expansion of coal power, which is responsible for most of its emissions. One recent report from Global Energy Monitor found there are currently 243 gigawatts of coal power under construction or permitted in China, more than the total capacity of current US coal plants. This boom isn’t necessarily incompatible with China’s official climate targets, but researchers say it is still a disaster for the climate. “There is no way to defend the current coal expansion,” says Li at Greenpeace.

Challenges remain

The country’s later carbon-neutral target date of 2060 may also be a tacit acknowledgement of the true difficulty of fully decarbonising. One big challenge, beyond the sheer scale of China’s current emissions, is that a large share of them come from difficult-to-decarbonise heavy industries. In 2020, emissions from China’s steel and cement sectors alone were greater than the European Union’s total annual emissions.

A shift to a less energy intensive economy with less construction and large-scale infrastructure could help here, says Myllyvirta, but lots will remain to be done. Official reports on China’s long-term decarbonisation strategy describe the need for expanded use of green hydrogen, as well as unproven carbon capture and storage and other technologies, including geoengineering. Success here isn’t guaranteed.

And yet, China seems to be well‑positioned to gain ever more influence as its energy transition accelerates, regardless of what happens with its own or overall emissions. Andrews-Speed says, assuming there isn’t a major event that isolates or destabilises China, such as a war with Taiwan, he sees a future in which its clean energy dominance comes to resemble the reach of the US oil industry after the second world war. Just as that influence shaped the 20th century globally, so too could China’s green dominance shape this century.

The coal question

Why is China building so many new coal power plants? The common explanation is energy security, a long-standing concern in China that escalated to a crisis following a series of severe blackouts in 2021 and 2022. These were driven both by drought reducing the amount of available hydropower and heatwaves raising demand for electricity for air conditioning. China doesn’t have much oil or gas, but it has abundant coal to fall back on.

Another explanation is that the coal plants can help back up the growing amount of intermittent wind and solar resources on the grid. In that case, if the power stations are used less even as more are built, emissions from coal could fall, despite there being more plants, says David Fishman at the Lantau Group, a Hong Kong-based energy consultancy. “This is China,” he says. “They can build a plant and not run it as much as they need.”

However, China’s existing coal power would be sufficient for both those purposes, says Lauri Myllyvirta at the Centre for Research on Energy and Clean Air in Finland. He says the plants are only operated at half capacity on average, largely because China’s electricity market is run in a rigid and centrally controlled way, with decisions about buying and selling power decided by administrators rather than market prices.

Despite some signs of reform, that has big consequences for emissions. A recent paper from Johannes Urpelainen at Johns Hopkins University in Maryland and his colleagues found the resulting inefficient decisions around producing and buying electricity between 2011 and 2019 were responsible for more emissions than India’s total over the same period. “China is moving slower than it should and we are going to pay a price for that,” says Urpelainen.

There have been efforts at reform, but they have been sedate and incomplete. Myllyvirta puts this down to pushback from entrenched interests among provincial governments and power producers. “When you change the rules, some people win, some people lose,” he says.

An even less benign explanation is that coal producers want to get in while they still can, says Li Shuo at Greenpeace East Asia. In a 2021 speech, China’s president, Xi Jinping, said its coal use would peak in 2025. Li says coal developers are rushing to build as much as possible before the peak arrives. “Got to make sure you get on the last train,” he says.