President Joe Biden just signed into law the biggest clean energy investment in U.S. history. It includes nearly $370 billion in subsidies for U.S. solar and wind energy development, electric vehicles, and much more.
After decades of Democrats struggling — and failing — to rally political support for serious climate action, the bill is a big step forward for the U.S. Critically, it brings the country closer to meeting its 2030 emissions reduction target. But Congress also had economic and geopolitical aims in passing the legislation: namely, catching up with a rival superpower.
China occupies a paradoxical place when it comes to the global fight against climate change. On the one hand, the country is perhaps best known as by far the world’s largest consumer of coal and the world’s largest emitter of carbon dioxide. On the other, China has emerged in the last decade as a global clean energy champion — with the help of government support on a grand scale. In total, between the private and public sectors, China invested $380 billion in clean energy in 2021, more than any other country. Beyond the sheer amount of money, the country has proven that solar and wind plants can be built at a massive scale and rapid speed. And the country has reaped economic rewards for its foresight: Chinese companies now dominate many of the clean energy industries that the world is finally embracing in the fight against climate change.
Now the U.S. is embarking on a crucial mission of climate investment catch-up. As Washington prepares to unleash its long-awaited climate spending, these charts show the gap between the U.S. and China when it comes to clean energy. The U.S. sees closing that gap as critical for the climate, geopolitical leadership and the future of the American economy.
How China surpassed the U.S. on renewables
China’s top rank in clean energy investment and production is the result of more than a decade of cutthroat entrepreneurship and government subsidies. The initial drivers of China’s solar industry were actually subsidies and incentives offered by other governments — Germany’s in particular. Then, in the wake of the 2008 global financial crisis, the Chinese government decided to invest in building these alternative energy sources at home.
At the time, Chinese people were increasingly worried about the air pollution that China’s coal plants were belching; in major cities, the air quality had become a problem the government couldn’t sweep under the rug. Renewables were an appealing substitute, and they also held economic promise.
“There was both a climate and a pollution drive there,” said Ilaria Mazzocco, a fellow at the Center for Strategic and International Studies who focuses on Chinese energy policy. “But also I think, maybe even more importantly, these were industries that the government saw as strategic.”
The Chinese government set targets for wind and solar capacity, extended credit lines to the private companies that largely dominate the sectors, and put in place subsidies to allow these clean energy sources to compete with cheaper coal-generated power.
In the decade since, those government policies have paid enormous dividends: Solar and wind energy production has taken off. Last year, China accounted for nearly half of new global renewable energy capacity, and the country recently built the world’s largest solar plant — a vast array of solar panels carpeting the desert in China’s Qinghai province. 2022 is expected to be another banner year, with projections suggesting new solar capacity could double to a record high.
Progress in the U.S. looks modest by comparison. American solar and wind tax credits in the U.S. have led to growth in solar and wind, but overall financial and regulatory support for renewable electricity generation has been higher in China. And efforts to speed the U.S. transition to clean electricity through stronger regulation, such as President Obama’s Clean Power Plan, were thrown out under the Trump administration.
The difference between the two countries’ green energy growth is clear in another metric: the share of electricity generated from renewables. China’s renewable electricity share leapt from 16 percent in 2005 to 28 percent in 2021; in the U.S., the share of electricity derived from renewable sources remains lower than in China.
Of course, it’s important to note that other trends in China haven’t been nearly as climate-friendly: Coal is still king when it comes to energy and electricity generation — powering China’s steel mills, cement production, and factories. The country’s carbon dioxide emissions have actually climbed in the last few years to a new high in 2021, as a result of a pandemic-induced stimulus that briefly stoked construction (and the production of those carbon-intensive materials, steel and cement, that go into construction).
But China’s clean energy trend is still a significant climate story. “China continues to have a massive challenge ahead of it, because of its reliance on coal,” Mazzocco told Grid. “But what we are seeing is a record build-out of renewable energy and the infrastructure that supports the energy transition. The trends point to the fact that China may end up building enough renewable energy to actually start supplanting the coal, which is actually really good news.”
China has zoomed ahead of the U.S. on electric cars, too
Along with solar and wind, China is now the undisputed leader when it comes to electric vehicles as well. Just as China was quick to support its renewable energy industries, the government also placed an early bet on electric vehicles. Over the past decade, the Chinese government has provided more than $100 billion to what it calls the “new energy” vehicle industry (which includes electric and hydrogen fuel cell vehicles). This includes generous subsidies and tax rebates for buyers.
China had never been able to outcompete foreign manufacturers in the conventional auto industry, but the EV business offered a fresh opportunity. “There was a clear interest in promoting a new type of technology,” Mazzocco said, “with the thought that would help Chinese manufacturers leapfrog Western and other global multinationals.”
2021 was a breakout year for electric vehicles in China, with 3.3 million sold in the country alone – half of the global total. That amounted to 16 percent of car sales in China. Meanwhile, in the U.S., consumers have had access to electric vehicle tax credits, but the subsidies have been less generous. Electric car sales reached just 5 percent of total U.S. auto sales in 2021.
Green tech: Made in China vs. Made in the USA
The boom in China’s renewable energy industries has set off alarm bells in Washington. And those alarm bells were an important driver for the new legislation.
China has developed a huge market for clean energy products by creating so much domestic demand for wind, solar, electric vehicles and other climate-friendly technologies. The result is that China has also become a manufacturing hub for green technologies — some of which are exported globally. Electric vehicle battery components and solar panels are the most profound examples. The vast majority of solar panels produced worldwide, including those used in the U.S., are made by Chinese companies.
The U.S. still carries some advantages when it comes to cleantech manufacturing: Tesla is the world’s top electric vehicle company and the U.S. still holds its own in wind turbine manufacturing.
But U.S. lawmakers are wary that China’s success in building out clean energy supply chains will mean that China will increasingly reap the economic benefits of the U.S. clean energy transition, and the U.S. will become ever more reliant on its rival.
“I think there’s been a concern that if we really invest in climate policy, and we want to ramp up the use of all of these technologies,” said Jonas Nahm, an assistant professor who focuses on energy policy at Johns Hopkins University, “we need to make sure that we also get some of the economic benefits of making the stuff and don’t just import it.”
The U.S. is hoping the new bill will help. The legislation is designed to give consumers and utilities bigger financial incentives if they buy solar panels, wind turbines, and electric vehicle components made in America. Although the extent to which the U.S. can gain ground on China remains to be seen, experts are optimistic that the country can expand manufacturing in some of these technologies. And at a time of historically deep acrimony between the U.S. and China, they see this clean-energy race as a healthy product of U.S.-China competition.
“I think there’s been this really anti-China sentiment in the U.S. for a long time, and I think a lot of that comes from this resentment that China has been able to build all of these things, and we haven’t,” Nahm told Grid. In the past, he said, that hasn’t been enough to motivate serious investments at home, but this bill changes that. “The great thing about this, even if it’s motivated by a competition with China, actually it’s about investments in domestic capabilities, and less finger pointing at Beijing … I think that really is sort of a hopeful thing.”
Thanks to Dave Tepps for copy editing this article.