At the end of September, Chinese President Xi Jinping announced his country’s intention to peak its emissions by 2030 and be carbon neutral before 2060. To meet this goal, China will have to expand its domestic market for clean energy technologies, many of which it produces. China is also hoping to spur other countries to be more aggressive in lowering emissions—calling for a “Green Revolution”—and these countries could also be a market for Chinese technologies.
Thanks to initiatives like these, China is for now winning the global race to invent and manufacture the technologies that will allow a new low-carbon world. Europe, which has made its own commitment to become climate neutral by 2050, is not far behind.Given its robust high-tech sector and wealth of private investment, the United States is well positioned to compete, but it risks falling behind. For now, it is still resting on the energy boom that came with the shale oil revolution and relying on its traditional approach to energy innovation. This shortsightedness will hurt the country economically and geopolitically. To avoid the pain, the United States needs a clear strategy for leading in new energy markets and technologies.The world’s energy system is changing rapidly. The last decade has seen exponential growth in the use of wind and solar for electricity generation and in the deployment of electric vehicles. Some of the milestones of this transition are well known: in 2019, consumption from renewable energy sources surpassed coal use in the United States for the first time in more than 130 years. In the United Kingdom and Spain, coal-fired power generation is almost phased out, while renewable energy sources have surpassed nonrenewable ones in Germany’s power consumption. This transition is not yet universal, but it is happening quickly and in an ever increasing number of places. Only when compared with the immense challenge of dealing with climate change does this transition look slow.China has emerged as the lead supplier of this transition. In 2018, Chinese companies made up over a third of the world’s manufacturers of wind turbines.In 2019, the country built over 70 percent of the world’s solar photovoltaics. In electric vehicles, China’s command is even greater: It holds almost three-fourths of the world’s manufacturing capacity for lithium ion battery cells, and it controls even more of the supply chain before the final assembly. Of the three big green energy technologies taking off around the world, then, two are largely made in China with a good portion of the third made there as well.
Europe is also eyeing this growing market. European countries rely more on solar and wind than most other countries in the world, and European manufacturers are prominent in wind energy. The European Union has already unveiled a battery strategy to create a competitive manufacturing value chain in Europe for sustainable battery technologies, and its European Green Deal is explicitly seen as not just an environmental strategy but as an industrial strategy as well. Beyond decarbonizing the continent’s energy system, the Green Deal looks toward developing the industries necessary to do so, with a special focus on hydrogen, which is one of Europe’s big bets and an area where it hopes to lead.
The implications of this picture should be obvious, at least when it comes to China. China will get good jobs and become the partner of choice for any country that wants to lower its greenhouse gas emissions. It is unlikely to care as much as about how materials are sourced or whether their extraction enriches local politicians in shady deals. The country will also exert control over supply chains, possibly tampering with them when politically convenient. In turn, it will be harder for the United States to lead if it does not build any of the nuts and bolts that the new world needs.