In China, the race to renewables is accelerating further, driving the emergence of a new industrial model. In 2023, China's growth was fuelled by clean technologies, accounting for 40 percent of last year's GDP expansion. Without the flywheel of renewables, China's GDP would have missed the government's growth target of "around 5%", growing by only 3.0% instead of 5.2%.
We are witnessing a massive shift in industrial investment towards green economy sectors. The main beneficiaries are renewables, batteries, electric cars and power grids, as well as railways, which have now become the main drivers of the country's economy. Next comes nuclear power, which the government plans to use to meet no more than 20 percent of demand by 2060.
The list goes on. Behind the scenes, out of the limelight, the Chinese of the new economy are working at the frontier of new molecules, “synthetic” bioeconomy materials and clean frontier agriculture. Of CO2 turned into starch, which Chinese scientists have achieved, as Minister XIE Zhenhua once told me, or of laboratory food. Corrado Clini, former climate negotiator and Italian Minister of the Environment under Mario Monti, often says that the future of agriculture, made increasingly uncertain by climate change, also lies in innovation and off-farm, off-soil production. Without fertilisers, with low energy and chemical consumption, with water recycling. I agree. We have the technologies and the business experience is being built up on the ground. Are we going to give it up and let EU agriculture and food systems go the way of the photovoltaic industry in 2010? It was a political decision then too.
On a closer timeline for market development, there are the electrolysers, where Europe still has a lot of cards to play.
As Europe falters, China implements Europe's Green Deal
The pace of China's great green march is set by the ambitious social and economic transformation plan that Beijing has drawn up along the lines of the European Green Deal. The '1+N', a structural industrial conversion programme involving all sectors of the national economy. By putting climate and environmental KPIs at the heart of all sectoral policies, the Chinese are building what the late Mauro Petriccione, former DG CLIMA, used to call the Green Deal: the "operational testbed, or the operating model, for the global eco-economy". A winning bet for Europe's competitiveness. But as elections approach, some European politicians are getting cold feet and backtracking on the Green Deal, while the Chinese are implementing it. Are they really willing to gamble away the future for illusory electoral gains? The bet may turn out to be a loser. And people hit hard by the rising cost of living are already noticing that something doesn't add up.
Chinese investment in clean energy has reached $890 billion, a sum close to the GDP of Switzerland or Turkey and almost equal to the total global investment in fossil fuel supply in 2023.
The record figure of 11.4 billion yuan ($1.6 billion) in 2023 represents all investment growth and a larger share of economic growth than any other sector. China is investing in its energy, economic resilience and military independence.
Meanwhile, Italy, for example, is paying dearly for its dependence on fossil fuels, with bills of 100 billion a year, loss of industrial competitiveness and increased strategic dependence on foreign countries. Is it worth it?
A new greener economic model
The surge in clean energy investment comes as China's real estate sector has contracted for the second year in a row. As I often say, the death of old industries is the birth of new ones. And a new economic model based on the real value of assets, starting with natural assets, and moving away from the not always rational mechanisms of finance. What is the value of pollution and health? How much do the water we drink and the air we breathe cost? These questions are also being asked these days at the European Central Bank, where the president has invited economists to come down from their ivory towers.
And so, for Xi Jinping, 'Houses are for living, not for speculation', which became the refrain on Chinese state television following the decision to let the property giant Evergrande go bankrupt. Is this another piece of the puzzle of the Chinese economic riddle? Maybe. What is certain, this shift in investment flows shows that renewables are now a key part not only of China's climate efforts but also of its broader economic and industrial policy. The party technocracy is implementing a grand programme of social engineering, realising the European mirage of an orderly transition away from fossil fuels.
Massive investment in production capacity and exports of clean technologies also means that China is crucial to the success of the ecological transition in the rest of the world, creating export markets, affordable products and economies of scale.
COP28 agreement signals 'beginning of end' for fossil fuel era. This means tripling renewable energy capacity by 2030
As China's new climate negotiator Su Wei recently pointed out, the target of tripling global renewable energy capacity agreed at the UN COP28 climate summit in December is a big plus for China's new energy industry. It is also likely to mean that China will step up its efforts to finance and develop clean energy projects abroad. It is also a warning sign for the Italian presidency's plans for Africa. Already, many African countries are asking why they should be tied to fossil colonialism instead of embracing the economy of the future.
Globally, China's unprecedented boom in clean energy production has driven down prices: the cost of solar panels has fallen by a further 42% year-on-year, a dramatic drop even compared to the historical average of around 17% per year, while battery prices have fallen by more than 50%. We owe it to the Chinese to reduce the cost of photovoltaic modules by 87% in ten years.
The importance of this factor for the cost-effectiveness of the global transition is clear.
China is changing the world's industrial scenarios. Most of the additional solar deployment in the International Energy Agency's revised projections is in China.
A just transition is a net-zero cooperation game
This also raises the question of “cooperative competition” in markets. As I wrote in an essay for the Italian Enciclopedia Treccani, which was published in December, the real crossroads of the transition is geopolitical. China's advantageous rise raises the question of how to link inescapable climate strategies with national industrial growth in Europe and the US.
The spectre of Chinese overcapacity should not lead to unnecessary and destructive trade wars. It should lead to enhanced collaboration via a division of international labour according to agreed rules, industry and technology standards that guarantee a “level-playing-field” for the global eco-industry. On the understanding that those who cry this year in Europe were the cause of today's evil yesterday.
By opposing the Green Deal, conservative parties are fuelling the populist vote, Spain's Minister for Ecological Transition Teresa Ribeira said recently. She is right. In fact, we would add, they are condemning themselves to irrelevance. With some notable exceptions like Ribeira, European politics is populated by sad, short-sighted extras.
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