Erik Halldén, SEB’s Sustainability Advisor for Asia, shares insights into China’s strategic accomplishments and initiatives to become a global leader within Green Tech. The question is - will it stand the test of time? 

In 2006, China surpassed the US as the world’s largest emitter of greenhouse gases, drawing significant media attention and increasing global awareness of its impact on climate change. However, less discussed is how 2006 also marked the implementation of China’s landmark Renewable Energy Law. This law set ambitious national targets for renewable energy and introduced attractive feed-in tariffs, sparking a boost in both manufacturing capacity and deployment of renewable energy. These strategic initiatives likely played a crucial early role in China's emergence as a global leader in Green Tech.

In 2010, China unveiled a plan to boost seven "strategic emerging industries," including alternative energy, new energy vehicles, and environmental technologies. These sectors received substantial financial incentives, with specific GDP contribution targets set for each. Demand was further stimulated through regional renewable energy targets, industrial energy efficiency targets, and subsidies for electric vehicles, driving further growth.

These examples highlight China's long-term strategic planning in Green Tech, leading to its global dominance. China’s most significant Green Tech industries, known as the “New Three,” include electric vehicles (EVs), lithium-ion batteries, and solar photovoltaics (PV). China now holds 80% of the global manufacturing capacity for solar PVs and over 70% for lithium-ion batteries. In 2023, Chinese car brands made up more than half of all EVs sold globally, despite representing only 10% of global sales for internal combustion engine vehicles. Additionally, nearly 70% of EVs sold globally in 2023 were manufactured in China, by both domestic and foreign brands.

China's long-term strategy in Green Tech has significantly boosted economic growth, with clean energy contributing 9.0% to the GDP in 2023, up from 7.2% in 2022, largely driven by the "New Three" according to data from Carbon Brief. However, trade disputes with the EU and US, which accounted for 41% and 12% respectively of China’s exports in these industries in 2023, may pose challenges. The impact of the disputes remains uncertain, but they are unlikely to diminish China’s global lead in the near term.

While EVs, lithium-ion batteries and solar PVs will continue to play a pivotal role in the transition, the Green Tech landscape is evolving rapidly. Emerging technologies and transition enablers such as low-emission hydrogen, carbon capture solutions, grid-scale energy storage and smart grid technologies present new opportunities for innovation and leadership. Similar to the “New Three”, China launched roadmaps and national policies supporting many of these technologies years ago, and they were all repeatedly mentioned in its landmark “1+N” climate policy framework released in 2021. The EU and US are also investing heavily in these technologies and may attempt to avoid a repeat of Chinese dominance similar to that seen in the "New Three" sectors.

In the end, global Green Tech competition is very much welcomed. By spurring innovation and reducing costs, competition encourages countries to develop and deploy green technologies more efficiently. Trade barriers and tariffs may be justified to govern fair trade practices, but it’s crucial for countries to navigate these challenges collaboratively to ensure a smooth, effective, and just global transition.