China’s dominance in the green technology industry means the world would have to pay up an additional $6 trillion for its energy transition without low priced Chinese supplies, new research says.
The West will have to choose between cutting China off its supply chains and meeting its climate goals as it faces a highly challenging energy transition, new research has found.
The United States and the European Union have, for years, been sounding the alarm over their dependence on China for critical clean technology, but are still far from building up their own supply chains in time to meet their net zero targets, according to energy research firm Wood Mackenzie.
Furthermore, China’s dominance in green technology means Western economies will have to pay up an additional $6 trillion for their energy transitions without low cost Chinese supplies, the analysis published this month said.
The findings findings come at a time when the West driven by a variety of ideological and geopolitical reasons is attempting to ‘de-risk’ itself from China, and in particular break China’s clean-energy supply-chain dominance.
The US and EU have ramped-up measures targeting Chinese exports. Both regions have imposed high tariffs targeting Chinese green tech, like solar panels and wind turbines, and energy infrastructure raw materials like steel and batteries. In conjunction with their high tariffs on Chinese green tech imports Washington and Brussels have also implemented targeted domestic laws to boost the development of their own clean energy supply chains. The Biden administration has also legislated US$369 billion in tax credits and other subsidies to US companies making low-carbon investments.
However, as Wood Mackenzie report noted, China’s clean-tech manufacturing capacity expansion has been at the heart of the global energy transition. China’s rapid expansion of its renewables sector has brought about “unimaginable scale and cost reduction” for the global clean tech industry, the report said. It also noted that Chinese products are now producing “best-in-class turbines, PV modules and battery cells.”
“Without China at the table, aggressive cost reductions we have become accustomed to are over,” the report said.
Source: [Edited extract] Asia Financial, February 22, 2024. https://www.asiafinancial.com/us-eu-cant-meet-climate-goals-without-chinas-cheap-green-tech
Link to Wood MacKenzie: February 12, 2024. https://www.woodmac.com/news/opinion/not-made-in-china-the-us$6-trillion-cost-of-shifting-the-worlds-clean-tech-manufacturing-hub/