China is blowing the competition away when it comes to clean energy buildout. In 2023, China alone spent more money on clean energy technologies than the next 10 biggest investors combined. On top of controlling supply chains for widely used technologies like solar panels and electric vehicle batteries, as well as the components critical to their manufacturing, China is also at the cutting edge of development for innovative and disruptive clean energy tech like clean hydrogen and energy storage. This means that China, which already dominates global clean energy tech markets, is only going to solidify its competitive edge going forward.
An extremely favorable policy climate and low production costs have turned China into a global clean energy manufacturing powerhouse. The International Energy Agency estimates that China’s clean technology exports will exceed $340 billion in 2035, if current policy trends endure. To put this massive sum in perspective, it’s roughly as much as the 2024 oil export revenues of Saudi Arabia and the United Arab Emirates combined.
The Biden administration has made major inroads to transitioning away from reliance on Chinese imports and has even made attempts to become competitive with China on global markets, most notably through the sweeping Inflation Reduction Act. However, the billions of dollars channelled into the United States clean energy sector through the act are just a drop in the bucket compared to Chinese spending. What is more, the U.S. political climate is about to change dramatically, and domestic clean energy spending will almost certainly take a tumble in the coming years.
While the United States is set to impose major tariffs on Chinese imports, it’s unlikely to make too much of a dent in China’s prodigious global market presence. According to the World Economic Forum, China is the cheapest location in the world today for manufacturing key clean energy technologies. “It costs up to 40% more on average to produce solar PV modules, wind turbines, and battery technologies in the US, up to 45% more in the EU, and up to 25% more in India,” the WEF report states.
On top of cheap manufacturing costs, China is flooding the market with its goods, and many world powers have accused Beijing of overproduction, to the detriment of the global economy. While China’s own economy is slowing down, Beijing’s strategic response has been to double down on manufacturing and ramping up export potential as the domestic market becomes saturated. “China Is Making Too Much Stuff—and Other Countries Are Worried,” read a 2023 Wall Street Journal headline. As surplus goods stockpile in a waning domestic market, China will likely try to push all those unneeded solar panels, electric cars, and other products onto the global market at steep discount, which is bad news for any would-be competitors, tariffs or no tariffs.
Plus, tariffs on Chinese technologies could hurt U.S. economic development as much or more than it helps. The Trump administration’s coming trade war with China will hike up prices on goods that U.S. consumers have no choice but to buy, since China has a chokehold on many critical supply chains. And then there’s the fact that China is pioneering technologies that simply aren’t being developed elsewhere.
The International Energy Agency estimates that China’s spending on research and development for clean energy technologies exceeded the global average by a factor of 2.5 in 2023. Green hydrogen and energy storage will likely soon be critical technologies in our rapidly changing global energy landscape, and China is at the vanguard of these developments. Allowing Beijing to continue to near-monopolize critical energy sectors going forward is a geopolitical minefield, but until more producers step up to compete, buyers will be left with no alternative.