China’s dash for world leadership in clean energy technologies has been one of the most significant developments in the global energy scene over the past few years and its implications are insufficiently recognised.
I well remember my own visits to China in the last decade when the prevailing mantra was still that coal was the fuel of the future as well as the past, and the world could like it or lump it.
China was then building new coal-fired power stations by the hundreds.
This created a sense close to despair about the whole climate change agenda.
All the efforts to reduce emissions seemed forlorn when set against the continuing attitude of the Chinese, which was essentially that coal is what we have, so coal is what we will use. The best hope was that the new plants would be less dirty than the old ones.
The policy shift since then has been dramatic and has been led from the top. The country’s own awful problems with coal-generated pollution have been hugely influential.
So too has been the identification of a massive economic opportunity – to achieve world leadership in technologies like solar panels, batteries and electric vehicles.
A report by Australia’s Institute for Energy Economics concluded that the move away from coal has disposed of “a strategic posture which has burdened China’s power companies and limited their appetite for innovative new clean energy technologies”. All that has changed and the appetite for global as well as domestic transition is voracious.
Domestically, China is now by far the world’s biggest investor in renewable energy. In 2016 it was, according to the International Energy Agency, responsible for 41% of additional renewable capacity, with a figure of 50% for solar.
Having created this massive domestic market, supported by its own manufacturing capacity, China is in an extremely strong position to export worldwide.
Last year Chinese companies invested £33 billion in clean energy projects all over the world.
By setting itself up as a global leader in green technologies, it is gaining political as well as economic influence in regions which are also rich in natural resources such as nickel and cobalt, which China is eager to acquire for its own production needs.
And so the cycle has developed at an extraordinary pace within the space of just a few years.
The Chinese government is now committed to creating the world’s largest carbon market in which about 1,700 utilities will be required to pay for the right to release carbon dioxide.
The initiative is meant to encourage further transition from fossil fuels to renewables. It will cover more carbon emissions than the European Union’s entire carbon market and will increase the proportion of global carbon emissions covered by some kind of pricing mechanism by 25%.
China’s move is highly significant as it joins the EU in placing a price on carbon while the US, under its current administration, retreats from action on emissions and seeks desperately to sustain and expand reliance on coal.
Once again, this plays straight into a political narrative that is favourable to China. Perceptions are in the process of being reversed. Instead of being identified as the world’s most guilty polluter, China can now present an image of responsibility by embracing the challenge of climate change and putting its money where its mouth is. In contrast, the US under Trump has reneged on the Paris Agreement.
This is far from being the whole story. China has not given up on coal and has been criticised for exporting new coal plants, particularly to its near neighbours. It continues to be the world’s leading polluter with carbon emissions still destined to rise, albeit much more slowly, because of the drive for economic growth.
However, perception counts for a lot – and on that score, China is now winning the environmental battle which seemed impossible a decade ago.
The new direction of travel is also a good fit with the Belt and Road Initiative, which aims to generate an infrastructure boom along ancient land and sea silk trading routes which link China to Central and South Asia as well as the Middle East.
This extraordinarily ambitious masterplan aims to tie together more than half the world’s population in 28 countries and mobilise vast investment potential, creating a vast sphere of political and economic influence.
As the IEE report notes: “China has been laying the groundwork for this initiative for years, earmarking large state-owned enterprises for internationalisation… the nation’s power companies have been turning their attention increasingly overseas in search of renewable energy investment opportunities. Belt and Road gives this shift momentum”.
The Belt and Road Initiative presents a huge dilemma for Western governments.
Either they embrace it and work to share in the investment opportunities it will create – which was the strategy pursued by David Cameron when he was Prime Minister – or else they can try to undermine it for fear that it will lead to a massive economic and political shift towards China.
However, the problem with the latter approach – which is the one favoured by both the United States and Theresa May – is that they may be trying to thwart something that is largely outside their control and that most of the countries potentially involved will succumb to the prospect of large-scale Chinese investment.
With clean energy projects now in the vanguard of the Chinese offensive and, specifically of the Belt and Road Initiative, the transformation proceeds apace.
China may still be the world’s biggest polluter, and its most coal-dependent economy, but it is the direction of travel that matters – and the Chinese government of today are showing themselves to be as astute as the silk traders of the past.