This is an extract from the report “China Energy Transition Review 2025” published recently by EMBER.
For China, the clean electricity transition involves more than decarbonisation – it is a strategic pivot to reimagine development. As the fossil-fuelled growth model – once central to China’s economic rise – reaches its limits, the country is pioneering a pragmatic, phased path to “green growth,” where environmental and economic goals reinforce each other. This dynamic is creating self-sustaining momentum, towards China’s broader ambition to build an “ecological civilisation” – aligning long-term prosperity with sustainability. Government plans for the energy transition treat it as a progressive transformation, unfolding over decades, that addresses socioeconomic and environmental goals simultaneously. The multiple benefits already being realised make a slowdown highly unlikely.
Strategic reorientation – The ‘Why’ of China’s energy transition
The fossil fuel-based model that powered China’s “economic miracle” is no longer sustainable, socioeconomically or environmentally. From 1978 to the early 2010s, China’s GDP grew by about 10 per cent annually, lifting hundreds of millions out of poverty and turning China into the manufacturing capital of the world, in tandem with a six-fold rise in coal consumption and a five-fold increase in both coal production and oil use.
Today, this model faces mounting constraints on growth, wellbeing, and competitiveness. Energy security is a key concern: oil import dependence has exceeded 70% since the mid2010s, and about 40% of gas is imported, exposing China to supply and price risks. China has sought to mitigate these risks by diversifying import sources while promoting domestic coal production. This strategy is rooted in the prevailing view of coal as the bedrock of energy security – captured in the often-cited phrase “rich in coal, short of oil, and low in gas.” Yet, even coal, once considered an important buffer, is now facing growing constraints. By the end of 2021, China’s proved coal reserves were estimated at 208 billion tonnes, while annual consumption hit 4.9 billion tonnes in 2024. So even assuming full extractability, current reserves might only last another 30 to 40 years at current rates of use.
Environmental costs are also mounting. Despite decades of efforts to improve energy efficiency and control pollution, degradation continues: air and water pollution, hazardous smog, and carbon emissions – which doubled in just under two decades to reach one-third of the global total. Recognising that the fossil-fuelled growth paradigm has reached its limits, China’s top leadership increasingly views the energy transition as an opportunity to redefine development. For decades, climate action in China, as in many countries, was framed as a trade-off between environmental gains and economic sacrifice, encapsulated in the argument that “the right to emit is equal to the right to develop.” Underlying this lies an ethical paradox: how can developing economies reconcile their legitimate aspirations for prosperity with the reality of finite planetary boundaries?
The clean energy transition offers a solution. It ensures domestic energy security, provides affordable power, enables industrial upgrading and facilitates supply chain expansion. In short, it is a better way to develop, reducing the environmental pressures of the fossil fuel age while creating new opportunities for sustainable growth. China has woven its transition ambitions into its long-term vision of an “ecological civilisation,” first proposed in 2007 and embedded in the constitution in 2018. This vision emphasises “harmony between humanity and nature” and champions green development with environmental goals and green electrification serving as systemic levers – addressing environmental challenges while unlocking new avenues for economic growth and global competitiveness.
Achieving this vision requires more than incremental adjustments; it demands, as articulated in the government’s White Paper on China’s energy transition, “a broad and profound systemic transformation of the entire economic and social fabric.” China’s approach has evolved from fostering clean energy technologies into a whole economy strategy. Central to this is the “1+N” framework launched in 2021, an overarching guiding document for achieving the dual carbon goals – peaking emissions before 2030 and reaching carbon neutrality before 2060 – plus detailed action plans for sectors and regions. China systematically embedded its climate and transition goals into planning, regulation and investment across all levels of the economy, mobilising the entire economic ecosystem – from state-owned enterprises to private-sector innovators and investors – to capture value from the clean energy transition.
Pragmatic implementation – The ‘How’
China has adopted a pragmatic “build before break” approach, prioritising the clean electricity build-out before phasing out fossil capacity. This strategy recognises that a clean energy future requires a reimagining of how electricity is produced, transmitted and consumed – while balancing multiple, sometimes competing, priorities like supply reliability, affordability and the economic transition in coal-dependent regions. To this end, China has taken a progressive approach. Legacy coal plants are being repurposed from baseload to flexible backup, stabilising the grid as renewables, storage and demand response scale, while giving coal-based regional economies time to adapt.
Reflecting this shift, the National Energy Administration (NEA) stated at the 2022 Two Sessions that new coal power projects solely for electricity generation would not be approved in principle, though “supportive units” of limited scale may still be built to ensure reliability. The 2022 Government Work Report called for repurposing coal power for grid flexibility and heating, facilitating renewable integration and displacing polluting loose coal. In 2024, this direction was reaffirmed with a mandate for all eligible coal units to undergo flexibility retrofits by 2027. However, recent coal permitting has still been sizable, but utilisation rates and dispatch rules will determine emissions trajectories.
Some argue that China’s clean energy growth is merely “additive,” piling new renewables on top of coal, oil and gas use. But, surging clean energy is driving China toward structural fossil demand decline – reducing the relevance of the “addition” argument. Pragmatic and sustained efforts have helped make clean innovations market-ready. China, like other countries, follows a deliberate sequence: introducing and supporting emerging technologies, scaling them up and eventually mainstreaming them. A distinguishing feature is the interplay between deployment and manufacturing, supported by phased and coordinated policies advancing both in parallel. Sequencing helps, but rapid target-driven growth can still produce boom-bust cycles; though market signals and exit pathways can mitigate these risks.
Beyond subsidies and regulatory incentives, China draws on a broad policy toolkit: signalling priorities through Five-Year Plans and sectoral strategies, funding early-stage research, supporting pilot projects and fostering integrated industrial clusters. Together, these measures create an industrial ecosystem where companies collaborate and compete across the value chain. China’s clean energy rise has been driven as much by market-building as by technology. For example, with solar generation now firmly established, a major pricing reform came into force on 1 June 2025 which moved renewables away from fixed feed-in tariffs to market-based pricing. For EVs, purchase subsidies were reduced by 30% annually from 2020 and fully phased out by the end of 2022.
Electricity trading provides an illustration of China’s iterative, long-term policy making. As China transitions toward a generation mix based on variable wind and solar power, expanding market-based electricity trading allows supply and demand to be balanced more efficiently – both in real time and across regions. By 2024, more than 6,100 TWh of electricity – equivalent to 63% of total electricity consumption – was traded through market mechanisms. This marks an eightfold increase from 2015 and nearly a doubling of volume since 2020. Inter-provincial trading has grown particularly fast, reaching 23% of market-traded electricity in 2024. Nearly all provinces have launched pilot spot markets, and as of August 2025, spot markets in several pioneer provinces – including Shanxi, Shandong, Guangdong, Gansu, Western Inner Mongolia and Zhejiang – plus inter-provincial markets have achieved full commercial operation. Coverage is expanding but not yet nationwide; inter-provincial alignment remains a work in progress.
Spot trading is vital for integrating variable renewables, providing dynamic, real-time pricing and dispatch to manage fluctuations. Spot trading, alongside cross-regional exchange, is expected to expand rapidly in the coming years, driven by sustained policy action. By the end of 2025, China aims to complete the initial framework of the unified national electricity market. By 2029, the plan is to fully establish the unified market, ensuring consistent market mechanisms and fair regulatory oversight nationwide. This will mark the culmination of a 15-year process, stimulated by myriad policy steps on a coordinated nationwide basis, enabling Chinese consumers and businesses to gain full benefit from the growth of wind and solar generation.
The Future – The “growing-by-greening” dynamic
China’s pursuit of a new development model powered by clean energy is becoming a key engine of economic progress. Rapid and still-accelerating deployment of products such as solar panels, wind turbines, batteries and EVs has turned these clean energy electro-technologies into a new driver of GDP growth. While growth in traditional industries has slowed, new technology sectors are surging ahead. In 2024, the “new” economy – including high-tech, clean electro-technologies, and other innovation-driven sectors – contributed more than 18% of China’s GDP, up from 17% in 2020.
This surge has been particularly driven by the rapid rise of the clean energy sector. Led by the “new three” – solar panels, batteries and EVs – this sector expanded three times faster than the overall economy in 2024, contributing $1.9 trillion to the country’s economic output – an amount comparable to the annual GDP of Australia. Moreover, growth in clean energy technologies like EVs is generating broader economic synergies by boosting demand for related sectors such as IT services and digital infrastructure.
Outside China, the accelerating clean energy transition is creating unprecedented global demand for equipment and supply chains – much of which is met by Chinese firms. The scale of the global transition is so large that some observers refer to a “new industrial revolution.” Between 2020 and 2024, annual global investment in the transition – spanning renewable energy, grid infrastructure, electrified heating, and EVs – more than doubled, from about $930 billion to over $2 trillion. Supply chain investment grew even faster, quintupling from $32 billion in 2020 to $140 billion in 2024.
This global surge reinforces the economic rationale for China’s pivot from traditional growth sectors to “New Quality Productive Forces,” with innovation-driven sectors such as advanced manufacturing and clean energy at the core. This has created a powerful feedback loop, a “growing-by-greening” dynamic – a self-reinforcing cycle that propels China’s energy transition forward with increasing velocity. It is like steering a vast ship – it takes time to change course, but once the course is set, the momentum becomes self-sustaining and difficult to reverse – and the rationale for reversing becomes increasingly absent.
Building on the early success of the “new three,” China is now pursuing a broader goal of constructing a comprehensive clean energy system. This is creating demand for innovative solutions to manage long-duration variability in renewable output, electrify harder-to-abate sectors, and address residual emissions. The deployment of such technologies not only supports a deeper electricity transition but also opens new frontiers for high-value industries, complementing those already established. This dynamic is helping embed the clean energy transformation into China’s broader economic restructuring and reinforce the shift towards high-quality, innovation-led growth.
Early progress has turned the transition into a shared national project. The early gains are already reshaping the landscape: millions of green jobs created, tangible environmental improvements (including a 41% fall in fine particulate air pollution 2013-2022), and consumer-friendly innovations like smart EVs. These changes have fostered strong public backing for the energy transition. A survey jointly conducted by UNDP China and the Nanjing Institute of Environmental Sciences found that clean energy, including solar and wind, is the most popular climate solution, supported by over 90% of respondents. While this support may vary across regions due to China’s vast social and economic diversity, it nonetheless reflects a general and widespread tendency towards public endorsement of clean energy development.
Recent deployment figures vindicate this optimism. In 2024 China added almost exactly 1 GW of solar and wind capacity per day (358 GW across the year) – a pace equivalent to building a typical nuclear reactor every single day. Crucially, this wasn’t due to a handful of megaprojects but millions of decentralised choices across rooftops, villages and small businesses, in addition to utility-scale developments. Private firms are leading the most dynamic segments of the transition, particularly in EVs, batteries and renewables. These sectors are not led by legacy energy giants but by private firms, often emerging from IT and consumer tech enterprises.
Access the full report here.
