China and the United States, two of the world’s superpowers, have agreed to support a global target to triple renewable energy capacity by 2030. This announcement comes ahead of the COP28 climate conference. While both countries are pushing for a reduction in the use of coal, oil, and gas, they have not committed to completely phasing out fossil fuels, a step China considers “unrealistic”.
China, currently the world’s largest user of coal, is also leading in renewable energy production. It has been the top producer of renewable energy for over a decade and is rapidly expanding its solar and wind power capacity. This year, China is set to add as much solar capacity as the total existing capacity in the U.S. Fossil fuels now constitute less than half of China’s total power generation capacity. The country had previously aimed to reach 1,200 GW of renewable capacity by 2030 but is on track to achieve this five years ahead of schedule. By 2026, China might have up to 1,000 GW of solar power, contributing significantly to the global target of 11,000 GW needed to meet the Paris Agreement goals.
China’s renewable sector’s rapid growth is attributed to its commitment to becoming carbon-neutral by 2060 and increased investment in renewables manufacturing, spurred by pandemic-era stimulus measures and a shift away from excessive real estate lending. Despite its global leadership in renewables, China still generates about 70% of its electricity from fossil fuels, primarily coal. In contrast, the U.S. produced around 60% of its electricity from fossil fuels in 2022.
China’s dominance in the renewable energy technology market is noteworthy. It is expected to hold over 80% of the world’s solar manufacturing capacity through 2026, controlling the entire solar panel supply chain. This massive production capacity is pushing solar component prices to record lows, posing a challenge to other countries trying to expand their domestic production.
Despite these advancements, renewable energy utilization in China lags behind its potential, partly due to technical challenges in transmitting power to eastern population centers and integrating variable renewable energy into the grid. However, there’s optimism that China’s greenhouse gas emissions could enter a “structural decline” as early as next year, driven by record renewable installations, a rebound in hydropower, and a moderate economic recovery not reliant on infrastructure investment. Further, reforms in the power sector and adjustments to the emissions trading system could enhance the utilization rates of renewable energy, although issues like capacity payments to coal generators present complications.