The renewable energy market in China

As COP29 comes to a close, the world’s governments face significant challenges in trying to move towards net zero. This will be a considerable challenge for China, the earth's biggest polluter, which emitted 11,397 million metric tons of carbon in 2022. However, China is the world’s leading nation in developing renewable energy, which is crucial in the fight against climate change.

The Chinese lead the way in developing green energy for producing electric vehicles and solar and wind power. According to the research firm Bloombergnef, just under ninety per cent of the world’s investment in green energy comes from China. The country’s producers manufacture enough lithium-ion batteries used in electric vehicles to meet all the global demand. Eighty per cent of the world’s solar panels and sixty per cent of the world’s wind turbines are made in China.

The level of Chinese production of green energy technology gives it huge economies of scale allowing it to produce at unit costs other producers across the world struggle to compete with.

China is not just a producer of green technology its consumption levels are also rising significantly. Chinese energy businesses supplied 300 gigawatts of wind and solar power into their national electricity grid which is about sixty per cent of the amount installed globally. In the summer China opened the world’s biggest solar energy farm. The country is also building more nuclear power plants than any other nation. Last year China invested $720 billion in clean-energy technology which is nearly forty per cent of the world’s total spending in this sector. 

The source of Chinese investment in green energy comes from its high savings ratio which gives energy businesses access to investment funding. The Chinese government has also focused on the development of clean energy by offering low-cost business loans and subsidies.

A problem for Chinese businesses in receiving support from their government is they now face trade barriers from Europe and the United States. Chinese EVs, solar panels and wind turbines are now subject to tariffs because foreign governments believe the subsidies Chinese producers receive give them an unfair advantage.

China's focus on the green energy market is interesting. In many ways, the movement towards renewable energy can be seen as an 'industrial revolution' where rapid technological change has significant macroeconomic and global economic consequences. China seems to recognise this and is moving very fast to embrace green energy. The movement by China towards wind and solar power will bring with it environmental benefits and reduce the country's dependence on imported fossil fuels. The investment in green energy will also enhance Chinese economic growth and employment.  

Possible questions to discuss with a class

1. Why are fossil fuels seen as a market failure?

2. How can renewable energy reduce the market failure associated with fossil fuels?

3. How can the development of renewable energy increase Chinese economic growth and employment?

4. Discuss the advantages and disadvantages of the Chinese government's support for green energy.