China's Renewable Energy Momentum: A Turning Point in Global Emissions
China's commitment to renewable energy is gaining momentum, with international investors and Chinese institutions alike recognizing its financial and global entry significance. The world's largest emitter has seen a significant dip in carbon output, marking a turning point in its energy transition.
Schroders Capital Infrastructure has raised €100m for a China Renewable Energy Strategy, reflecting growing interest from international institutions. Meanwhile, Chinese investors are increasingly acknowledging the financial materiality of climate change, with 73% recognizing its importance. In 2021, the State Development and Investment Corporation (SDIC) took the first step, establishing a strategic investment group for renewable energies and deploying 10 billion yuan.
China's efforts are paying off. The country recently reported its first sustained dip in carbon output, unlike previous temporary drops during the Covid pandemic. This dip occurred alongside rising power demand, thanks to a rapid expansion of renewable capacity. President Xi Jinping has announced that China aims to cut its carbon footprint by 7-10% over the next decade as part of its updated Nationally Determined Contributions.
China's dominance in solar and wind manufacturing has led to price drops and plant closures for Western manufacturers. As a result, investment focus is shifting towards grid modernization, EV charging infrastructure, and clean heating retrofits. BlackRock, for instance, offers a BGF China Fund investing at least 70% of its assets in Chinese equities, focusing on the energy transition. By 2024, China committed $625bn to clean energy, making it the single largest investor in the transition and responsible for nearly a third of all global funding.
China's surge in renewable capacity is likely to accelerate a sharp fall in global fossil fuel demand from 2030 onwards, increasing risks of stranded assets for investors in oil, gas, and coal companies. As the world's largest emitter and a major driver of global emissions growth, China's transition to renewable energy will have significant global implications.
