China’s green ascent: leading the global transition

Despite the postponement of China's new NDC submission to the UNFCCC Secretariat, it is already clear that the country’s economic, geostrategic, environmental, and political landscape suggests its green transition will continue beyond 2025 and will shape the climate arena throughout the next decade. With Trump's second administration withdrawing the U.S. from international climate commitments, China has a strategic opportunity to expand its influence and strengthen its position in the global energy transition. Given that green technology exports and domestic adoption drive economic growth, China is unlikely to halt its adoption of green technologies.

Introduction

This article explores how China’s role in climate action will evolve, considering its domestic policies, trade dynamics, and the United States (U.S.) retreat from international climate leadership. The year 2025 marks a turning point for China's role in global climate action. As the largest emitter of greenhouse gases (GHGs) and a nation that positions itself as a representative of the Global South, China stands at an interesting crossroads. The U.S. withdrawal from the Paris Agreement under President Trump, combined with his "drill baby drill" oil policies, freezing funding through the Inflation Reduction Act (IRA) and his plans to dismantle USAID, further amplifies China's potential leadership role. 

As the new Trump administration in the U.S. places more focus on its domestic economy and Putting America First policy, many of us eagerly waited to see what climate targets the other large emitters, like China, India and the European Union (EU), would place in their updated nationally determined contributions (NDCs). These updated NDCs were supposed to be submitted till February 10, 2025. Unfortunately, around 95% of countries have missed the deadline to submit their new climate pledges for 2035 and the UN agreed to prolong the submission to September 2025. 

Regardless of what China submits in its updated NDC, game theory rhetoric suggests that there is no need to commit to something in advance when others, like the U.S., do not do so as well. According to this rationale, it is preferable to exceed low targets than to fall short of high ones. This is exactly what China has been doing in the last few years when it exceeded expectations in the deployment of renewable energy and electric vehicles (EVs). The points written in this article suggest that China's green transition will continue beyond 2025 and will move China further in its ambition to strengthen its position on the global stage. Especially when one recognizes that the Trump administration's term is limited to four years, China is more likely to seize this strategic opportunity to expand its influence and leadership in the global energy transition and decarbonization efforts. 

Moving forward in the field of climate change is not only a geostrategic move, but it also strengthens China's resilience. To understand the rationale and ideology behind China's climate policy, it would be useful to mention how President Xi Jinping has consistently emphasized the centrality of climate change and sustainability to China’s development strategy. His ideology on climate change is deeply rooted in his "Thought on Ecological Civilization". 

Under President Xi Jinping's leadership, the Global Development Initiative (GDI) was introduced, aligning economic growth with sustainable and equitable progress globally. While the GDI fosters international cooperation on sustainability, it complements the domestic framework established under the Thought on Ecological Civilization. Xi’s vision integrates ecological priorities with economic goals, reflecting his broader philosophy of creating a "community with a shared future for mankind." In 2017, President Xi said that “China has become an important participant, contributor, and torchbearer in the global endeavor for ecological civilization.” This approach not only reinforces China’s domestic ambitions but also clearly states how China sees itself in a leadership role in the global sustainability efforts.

1. Domestic policies: ambitions and prospects

Having visited Beijing in 2024 with a SIGNAL Group delegation, I was struck by the city’s advanced infrastructure, widespread adoption of EVs, with EV penetration in Beijing reaching over 30% of all vehicles as of 2024. This remarkable shift was evident in the city’s improved air quality, a stark contrast to my previous visits. We all know that it is not enough to deploy more electric vehicles in city centers to reduce overall carbon emissions or air pollution. It's important to know how the electricity that charges the EV batteries is generated. 

In this regard, China’s electricity consumption grew by 6.8% in 2024. In 2024, renewables and nuclear energy contributed 53% of China’s electricity, up from just 22% in 2014. However, according to Statista, coal still dominates, with over 1,147 GW of operational capacity - more than five times that of the U.S.. In 2023, new coal power permits exceeded 100 GW, and additional plants continued to be approved in 2024. This constitutes the "green transition paradox" - the fact that China is leading in renewable deployment while still expanding its coal consumption. 

Statista also mentioned that China accounted in 2023 for around 54.8% of total coal electricity generation in the world. This astonishing figure illustrates how coal is China's weakness when it comes to climate mitigation, and apparently not only affects China. The pollution caused by these coal-powered plants and other industrial installations in China influence neighboring Korea and Japan, which have been experiencing significant transboundary air pollution, particularly during winter months, originating from China.

China also remains heavily dependent on oil, importing nearly 70% of its consumption and accounting for 15% of global demand. Its dependency on oil imports creates economic vulnerabilities - one of the reasons China has been investing in renewables, nuclear energy, and electrification. EV adoption, LNG-powered trucks, and green hydrogen investments are part of this strategy, but oil remains dominant in sectors like aviation, shipping, and heavy industry. 

China has surpassed 1,200 GW of wind and solar capacity, exceeding expectations. It would be interesting to see what targets China includes in its new NDC. Till then, according to the IEA, for the period 2024-2030, China is expected to install 3,207 GW of new renewable electricity capacity, more than tripling the growth China witnessed between 2017-2023. The West-to-East Power Transmission initiative, with over 38 Ultra-High Voltage (UHV) transmission lines spanning 48,000 km, ensures that renewable energy generated in the west reaches the industrial hubs in the east.

China has also rapidly expanded its nuclear power capacity, aiming to surpass both the U.S. and France by 2030. According to the Global Nuclear Power Tracker (GNPT), as of July 2024, its operational nuclear capacity stood at 58.1 GW, with plans to source 10% of its electricity from nuclear by 2035. At COP28, China joined 21 other countries in committing to tripling global nuclear capacity by 2050.

On the demand side for energy, China leads in EV production and adoption, with EVs comprising over 50% of new vehicle sales. The country is home to over 200 EV manufacturers, including BYD, NIO, XPeng, and Li Auto. Government incentives include purchase subsidies, tax exemptions, and expanded charging networks, as of June 2024 totaling a little less than 10 million charging stations (public and private).

Tesla's sales in China rose 8.8% in 2024, delivering 657,000 vehicles, accounting for 36.7% of its global sales. Meanwhile, oil demand is declining, with China's National Petroleum Corp predicting a 25-40% drop in gasoline and diesel sales over the next decade. This aligns with Sinopec's forecast that China’s oil consumption will peak by 2027.

One other notable development in China is its carbon market. Operating from 2021, China's emissions trading scheme (ETS) started out with around 2,000 key emitters in the power sector. When completely operationalized, the ETS will include eight major emitting sectors, which together account for roughly 75% of China's total emissions. The national ETS in China is a mandatory carbon market, currently the largest in the world by volume of emissions covered, though the average price of carbon credits on the market is very low (around $9/ton). As with every new carbon market, China's ETS faces inefficiencies, nevertheless, discussions are underway to expand coverage to more industries and regions, improving accountability and efficiency. Since no one is forcing China to create and expand its carbon market, these additional developments make it more likely that China will continue its decarbonization momentum. 

In addition, China's decarbonization momentum was reinforced by the Basic Standards for corporate sustainability disclosures, introduced in December 2024. Initially voluntary, these standards align with global ESG practices while addressing domestic priorities. By 2026, large, listed firms will be required to comply, ensuring standardized corporate sustainability reporting.

2. Resource dominance and technological advancements

China’s Belt and Road Initiative (BRI) has allowed the country to strengthen its control over clean energy supply chains, securing access to lithium, cobalt, and rare earth metals crucial for renewable energy and EV production. China 80% of the global solar supply chain, including photovoltaic cells and polysilicon.

Through the BRI, China has heavily invested in mining projects across Africa, Latin America, and Central Asia, securing key minerals for EV batteries and advanced clean technologies. Infrastructure projects like ports, railways, and pipelines benefit recipient countries which enjoy leapfrogging to cutting-edge technologies, while strengthening China’s energy security and trade logistics. Therefore, the BRI serves as an export platform. It allows Chinese technologies in the decarbonization sectors, as well as in other fields (i.e., digital infrastructure, AI-driven technologies) to expand in developing countries. These exports and infrastructure projects through the BRI are considered an important economic growth engine for China by creating demand for Chinese goods and services, expanding export markets, trade routes, and financial influence. 

However, to continue leading the transition to a low-carbon world, it is not enough only to manufacture the green products necessary today, but to invent new disruptive technologies of the future. According to an article published in June 2024 in The Economist, China’s emergence as a global leader in sustainability is strongly underpinned by its advancements in science and technology. China is investing heavily in research and development (R&D), now producing more high-impact scientific research than the U.S. and EU combined. Chinese institutions lead in next-generation technologies, such as perovskite solar panels, supported by state-backed research funding and technology hubs.

3. Global climate leadership and trade dynamics

China portrays itself as a leader of the Global South, advocating for the allocation of climate finance and technology transfer from the Global North to the developing countries. China, because it is defined as a developing country under the UNFCCC, is not legally obligated to provide international climate finance in the same way that developed countries are. At COP29, it called on developed nations to fulfill their financial commitments to developing countries. However, given the fact that China is the largest GHG emitter, there has been criticism towards the Chinese for not providing enough climate finance for developing countries and for not disclosing its contributions.

When traveling in the megacities of China - roughly 65% of China's population lives in urban settings - it is impossible to avoid the thoughts that China is not a typical developing country. Prices in cities are similar to those in some developed countries. The GDP per capita of Chinese people living in urban areas is comparable with that of several European countries. During COP29 in Baku developed nations called for wealthier developing countries, including China, to contribute to climate finance, citing their significant economic growth and emissions. China has resisted these calls, asserting that such demands are attempts to shift historical responsibilities. 

China, as a developing country under the UNFCCC, is not required to mobilize financing under the New Collective Quantified Goal on Climate Finance (NCQG). While resisting any binding agreements to mobilize climate finance, China has voluntarily mobilized finance through the BRI, AIIB, and the South-South Climate Cooperation Fund - all aimed to counter the influence of the World Bank and other Western-led financial institutions like the IMF and the ADB. 

According to the Center for Global Development (CGD), between 2013 and 2021, China contributed on average $3.8 billion per year in bilateral and multilateral finance to developing countries, totaling $34.3 billion. Most of this, or $27 billion, has come through China’s bilateral and regional programs. It is expected that China will continue to provide financial assistance that aligns with its geostrategic, economic and trade interests, now more than ever as USAID financing might leave a $40 billion void to be filled by other financing sources. The country is also expected to play a larger role in (BRI) development projects, providing expertise and construction capabilities while other entities finance the deals.

With regards to China's green trade dynamics, the internal developments in China's energy mix reduces China's addiction to imported oil. This has vast implications and rippling economic effects on the exporting countries as they would either need to find other markets for their fossil fuels in a decarbonizing world, or to shift their economy away from their fossil fuel exports. This would also affect geopolitical dynamics as China becomes less reliant on fossil fuels coming from other countries. 

In addition, China’s green technology dominance has raised concerns of state-sponsored over-capacity and market dumping. China's trade partners, which have their own automobile industries, are extremely concerned with the penetration of Chinese EVs into their markets; a trend that suppresses local manufacturing. In practice, Chinese EVs are often 15-20% more expensive abroad than in the Chinese market (part of which is a result of tariffs, transportation costs and other factors). To counter these challenges, there is a growing practice where various Chinese manufacturers have started investing in manufacturing outside China, including batteries (in the EU and U.S.), solar PV (in Vietnam and Malaysia), and NEV parts.

Despite higher tariffs on Chinese exports by European countries and the U.S. - now more than ever - it should be noted that China is diversifying its clean energy exports to markets outside of the EU and the U.S. The share of China's exports going to South-East Asia, African countries, and Latin America is constantly increasing and according to Dialogue Earth, has reached 50%. They mention that any new tariffs by the U.S. on China's cleantech will have limited effects on China's exports as only 4% of China’s total exports of solar, wind and EVs go to the U.S.

According to the China Green Trade Report 2023, China’s exports of the New Three - PV, lithium-ion batteries and EVs - surged from under $20 billion in 2017 to over $150 billion in 2023 - a growth of 650%. The New Three are an important driver of economic growth for China's economy. While the economy achieved its official 5% GDP growth target, this was largely driven by government stimulus measures, increased fiscal spending, and strong export performance. Domestic demand remained weak, with ongoing issues in the real estate sector, mounting debt, and subdued consumer confidence. 

Adding to that, China faces labor shortages in key industries such as high-tech manufacturing and healthcare due to its aging population. Youth unemployment has surged, surpassing 21% in June 2023. This paradox stems from a mismatch between the skills of new graduates and market demands, as well as a sluggish job market in sectors preferred by younger workers, some of which are leaving China to seek jobs or advanced degrees outside China.

These pressures have forced the Chinese government to rethink its economic policies, with a greater emphasis on vocational training, industrial upgrading, and incentives for job creation also in green industries. The PV sector in China has created more than 300,000 manufacturing jobs across its solar value chain making this an important driver of employment in China, something that the Chinese government cannot overlook.

Final words

As 2025 begins, it seems that China's green transition, its investment in sustainable industries, and its green exports will be critical in shaping its economic trajectory and employment figures, while simultaneously addressing both domestic and international economic and climate uncertainties, also brought forth by the second Trump Administration. The U.S. withdrawal from its climate obligations, as well as strengthening the oil and gas industries, will allow China to seize these four years to strengthen its dominance in fields related to climate change domestically and internationally. 

Though China will probably have to negotiate new trade conditions to alleviate the fears of its trade partners, this will not stop the distribution of Chinese green technologies around the world. As for the U.S., S&P Global has quoted analysts saying that the U.S. risks being sidelined as others, including the EU and China, take the lead. I believe this would be the right interpretation of the situation. It is not too late for the Trump Administration to shift its approach toward China in the climate arena. 

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.