top of page
Search

China Poised to Maintain Green Tech Dominance Despite Global Efforts

Analysts predict that China will maintain its leading position in the global green technology sector well into the 2030s, even as developed nations strive to promote their own domestic supply chains to reduce dependence on China.

China Poised to Maintain Green Tech Dominance Despite Global Efforts

According to a recent study released by the Economist Intelligence Unit (EIU), China's supremacy in crucial areas such as solar, wind, and battery technology is projected to make it a pivotal supplier driving the green transition for at least the next ten years.


Matthew Oxenford, Senior Analyst at EIU, affirms, "Despite attempts by the US, EU and other advanced economies to spur domestic manufacturing in green technology, China’s lead in many of these areas – particularly solar, wind and battery technology – will [see it] remain a key supplier for the technologies powering the green transition for at least the next decade."


While developed nations have implemented strategies like the Inflation Reduction Act to offer substantial subsidies for the green industry and incentivize the use of domestically sourced materials and equipment, China's stronghold in sectors like solar photovoltaics and lithium-ion batteries is expected to persist.

The Inflation Reduction Act, passed by the US Congress in August of the previous year, is widely recognized as a transformative move in global climate policy. It not only provides substantial support for the green industry but also encourages the use of domestically sourced raw materials and equipment to establish the US as a leader in the clean energy supply chain.


However, experts emphasize that China's current dominance in these green tech sectors, rooted in economies of scale, is unlikely to change in the short term. Kevin Kang, Chief Economist at KPMG China, explains, "China has been dominating the supply chain of many of these technologies, so it has the advantage of economies of scale. In the short-term, the costs for the US and EU to develop their own supply chain will remain high."


Sun Huaiyan, Solar Supply Chain Senior Consultant at Wood Mackenzie, highlights that fundamental challenges related to raw material capacity and cost competitiveness present a formidable roadblock for the US and EU in building their local supply chains. "With the support of varying policies, local manufacturing facilities will have the opportunity and possibility to develop during the policy incentive protection period," says Sun. "But when the policy ends, US production will still face competition in the global market."


Despite efforts by developed nations to enhance and safeguard their green tech industries through subsidy programs, the established dominance of China's supply chain, particularly in sectors like solar and wind, is likely to persist. While these nations could potentially catalyze their domestic green tech industry and bolster job opportunities, the current global supply chain dynamics are expected to remain largely unchanged.


Experts anticipate that the costs associated with relocating businesses domestically to avail of green subsidies could drive up costs for solar panels and other green commodities, impacting project economics. However, the full impact of policies and market evolution remains to be seen. As more countries introduce measures to safeguard their domestic industries and emerging energy transition technologies reshape raw materials markets, the competitive landscape could shift, potentially opening avenues for other countries to vie for prominence in the green tech supply chain.


While the specifics of the outcome remain uncertain, policy initiatives like the Inflation Reduction Act are already reshaping global investment dynamics and could pave the way for evolving possibilities in the medium to long term. In a competitive environment where multiple economies are engaged, the current degree of China's dominance in key green tech supply chains may witness change over time.

By fLEXI tEAM


Comments


bottom of page