The Weekly Planet #18. China Shock, Part 2: Renewable Energy

When Brazilian President Luiz Inácio Lula da Silva arrived at the COP30 climate summit in Belém this November, he stepped out of a Chevrolet - the lone American vehicle in a fleet of Chinese electric and hybrid cars assembled to shuttle world leaders through the Amazonian city. The symbolism was unmistakable. As delegates gathered to negotiate emissions reductions, Chinese EVs from BYD and Great Wall Motor hummed quietly through streets once choked with exhaust , while the United States, for the first time in three decades, sent no senior representative to the talks. The world's clean energy transition is accelerating, but it is increasingly being conducted in Chinese.

This represents a new chapter in what economists have called the "China Shock"—the profound disruption that Chinese manufacturing prowess has brought to global industries. The first China Shock, beginning in the early 2000s, devastated American manufacturing employment as cheap Chinese goods flooded Western markets. The second China Shock is about renewable energy, and its implications may be even more far-reaching. China is not merely competing in clean technology; it is establishing the kind of dominance that reshapes entire value chains and redefines what is possible.

The Scale of Transformation

The numbers are staggering. Chinese electric vehicle companies have invested $143 billion between 2014 and 2025 to establish global dominance in the EV industry. In 2024, for the first time ever, Chinese EV firms invested more abroad than at home—$16 billion overseas compared to $15 billion domestically. This historic reorientation of capital reflects both the saturation of China's domestic market and the strategic imperative of building production capacity closer to customers as trade barriers rise.

Two countries have attracted the lion's share of this investment: Indonesia and Hungary. Indonesia, the world's largest supplier of nickel—a crucial battery mineral—has drawn $22 billion in Chinese investment. Chinese companies now control roughly three-quarters of Indonesia's domestic refining capacity, creating an integrated supply chain from raw materials to finished vehicles. Hungary, meanwhile, has received $18 billion and is becoming a major battery production hub in Europe, with CATL's 100-gigawatt-hour plant expected to begin mass production next year.

This global expansion extends far beyond these two hubs. BYD, which rolled its 14 millionth new energy vehicle off the production line in October 2025 at its Camaçari plant in Brazil—its largest factory outside Asia—is building manufacturing facilities across Latin America, Southeast Asia, and Europe. CATL has plants in Germany, Hungary, Indonesia, and Spain. Chinese companies are constructing battery factories in Turkey, Morocco, Slovakia, and Thailand. They are not merely exporting products; they are exporting capability, building the infrastructure for a global clean energy economy.

The Paradox of China's Green Revolution

China's clean energy transformation contains a fundamental paradox . The country is simultaneously the world's largest consumer of coal—burning nearly half the global total—and the undisputed leader in renewable energy deployment. In 2024, China installed more renewable energy capacity than the rest of the world combined. By mid-2025, wind and solar reached a historic low share of 51 percent for coal in power generation, while renewables accounted for 60 percent of total installed capacity.

Yet coal refuses to die. China approved 66.7 gigawatts of new coal-fired power capacity in 2024, and construction started on 94.5 gigawatts—the highest level since 2015. This apparent contradiction reflects deep structural forces: the grid infrastructure designed around coal's flexibility, economic incentives that lock in fossil fuel generation, and powerful industry interests resistant to change. As one analyst put it, instead of replacing coal, clean energy is being layered on top of an entrenched fossil fuel system.

The implications are significant for global emissions. China's carbon dioxide emissions fell approximately 1 percent year-on-year in the first half of 2025 - a meaningful decline driven by record solar deployment that matched all electricity demand growth. But the country remains far off track for several climate targets, including carbon intensity goals. The rapid expansion of renewables shows what is possible; the persistence of coal shows what remains to be done.

Energy as Geopolitical Weapon

The clean energy transition was supposed to liberate the world from the geopolitics of fossil fuels. Instead, it is creating new dependencies and vulnerabilities . After a fifty-year period of relative stability following the 1970s oil crises, energy is once again being wielded as a coercive tool of statecraft. Russia's gas supply cuts to Europe demonstrated that oil and gas remain potent weapons. But the rise of clean energy technologies introduces novel risks.

China now produces approximately 80 percent of all solar panels and more than 70 percent of electric vehicles sold globally. It dominates the processing of critical minerals essential for batteries and clean energy technologies. This concentration creates what energy security experts call new "chokepoints"—potential vulnerabilities that could be exploited for political leverage, just as oil producers once wielded the energy weapon.

The difference is that fossil fuels are geographically constrained—you drill where the oil is. Clean energy technologies can theoretically be manufactured anywhere, but the practical reality is that China has built such commanding advantages in manufacturing scale, supply chain integration, and cost efficiency that diversification is extraordinarily difficult. Chinese solar panels have dropped in price by almost 90 percent over the past decade, reducing the overall capital expenditure for renewable projects by 70 percent globally. This is a gift to the world's climate and a source of profound strategic leverage.

Saving the Paris Agreement

A decade after the Paris climate accord was signed, political support in the West is faltering. The United States has withdrawn again under President Trump. European countries and Canada are hesitating due to the costs and political challenges of climate policies. And yet, paradoxically, the global transition to clean energy is accelerating - largely because of China.

China's massive investments in manufacturing solar panels, batteries, and electric vehicles have driven down costs so dramatically that clean energy is now competitive with fossil fuels in many markets without heavy subsidies. This cost revolution is enabling developing countries to adopt renewables affordably even as climate finance from wealthier nations declines. India, for example, is purchasing vast amounts of solar and battery capacity from Chinese manufacturers without relying on Western subsidies. Brazil is building its electric vehicle industry on Chinese investment and technology.

The irony is thick: the country once blamed for the failure of the 2009 Copenhagen climate talks is now, through industrial might rather than diplomatic leadership , doing more to advance the global energy transition than the nations that once lectured it about emissions. When President Xi Jinping announced at the United Nations in September 2025 that China would cut its greenhouse gas emissions 7-10 percent below peak levels by 2035, he was speaking from a position of strength. China's position as the global supplier of low-carbon goods is now all but unassailable.

A New Alignment?

With America retreating from climate cooperation, new alignments are emerging. Europe and China, despite their trade tensions and political differences, share a strategic interest in advancing the green transition—not only within their own borders but across emerging markets and developing economies. Some analysts have proposed a formal EU-China green partnership that could accelerate global decarbonization while managing competitive tensions through clear agreements on market access and technology sharing.

Such a partnership faces enormous obstacles, not least the requirement that China adopt a more neutral stance on Russia's war in Ukraine. But the underlying logic is compelling: if the world is to have any chance of limiting warming to manageable levels, the two largest sources of climate technology and finance must find ways to cooperate. The alternative - a fragmented world in which climate action becomes a casualty of great power rivalry - is too dangerous to contemplate.

The renewable energy China Shock differs fundamentally from its manufacturing predecessor. The first shock destroyed American jobs and hollowed out communities; the second is making the technologies needed to address climate change affordable and accessible. The first shock was resisted and lamented; the second, however complicated its geopolitical implications, offers benefits that the world desperately needs.

Living with the Shock

The clean energy transition will proceed with or without Western leadership. Chinese EVs will continue to appear on streets from Belém to Budapest. Chinese solar panels will continue to drop in price, making renewable energy accessible to countries that could never have afforded it otherwise. Chinese battery factories will continue to rise across continents, embedding China ever more deeply in the global energy infrastructure.

The question for other nations is not whether to resist this transformation but how to navigate it. Energy security no longer means just securing oil supplies; it means reducing dependence on volatile imports, investing in domestic clean energy production, and diversifying supply chains for critical technologies. Complete self-sufficiency is a myth - even the United States, which produces more energy than it consumes, remains deeply tied to global markets. But thoughtful policies can reduce vulnerabilities while capturing the benefits of Chinese cost reductions.

The renewable energy China Shock is not a problem to be solved but a reality to be managed. It carries risks of dependence and leverage, but also unprecedented opportunities to accelerate the energy transition that the planet requires. As those Chinese EVs glide quietly through the streets of Belém, they reflect not just the rhythm of a changing world but the possibility of a shared low-carbon future - one being built, for better or worse, largely by China.