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Emissions to electrification – dominant in clean tech, is China leading the energy transition?
key takeaways.
Despite pro-oil, anti-renewables posturing by the Trump administration, the transition to low-carbon energy is alive and well. But a change of leadership is underway
China’s desire for control over its core needs has driven a strategic approach to energy security strongly focussed on renewable energy and grid-scale storage
At the same time, its dominance of the supply chain for solar and battery storage technology positions it to benefit economically from the global energy transition.
The return of the president who withdrew the US from the Paris Agreement – and who revived the phrase ‘drill baby, drill’ in his election campaign – has led some to conclude the energy transition is in danger of being cancelled.
Despite the political theatre, the attractive economics, energy-security benefits and opportunity to compete in the energy supply chains of the future make the low-carbon transition inevitable. The energy transition is powering ahead – but its engine may not be where you expect. With the US touching the brakes, China is building a clear lead.
Despite efficiencies, global energy use is still growing
In emerging economies, population growth, economic development, urbanisation and greater access to electricity are driving significant increases in energy demand. Meanwhile, in developed economies, electrification, data centre growth and the rise of artificial intelligence (AI) are boosting demand for the first time in decades.
The global economy’s hunger for energy continues unabated. While CO2 emissions rose only 0.8% in 2024, thanks to significant growth in renewables, total global energy demand jumped 2.2% – nearly twice its recent average.1 In the longer term, the US Energy Information Administration forecasts a 34% increase between 2022 and 2050.2
Embedding electrification in high-temperature industrial heat processes, steelmaking and solid-state batteries could reduce energy demand by up to 25%. But even with significant energy-efficiency gains, the world will keep consuming more energy.
Electricity – especially from renewables – will provide the bulk of new energy supply
To meet this demand while pursuing decarbonisation targets, electricity from renewables will need to play a starring role. The Energy Transition Commission calculates that the proportion of electricity in the global energy-supply mix would have to shift from about 20% today to more than 60% to achieve a net-zero global economy by 2050.3
Just as oil shaped 20th-century geopolitics, electricity and clean tech are helping to shape the 21st century world. Global electricity demand jumped 4.3% in 2024 – almost double the percentage increase in overall energy demand, with supply growth for renewables more than three times greater than oil supply growth.4 For nations, dominance in the technologies enabling clean electricity generation and storage is a source of strategic advantage.
Greater renewables use means China’s energy-driven emissions are peaking
Continued urbanisation and modernisation is fuelling Chinese energy demand. Long a net importer of energy, the country is a major consumer of fossil fuels – particularly coal, which contributes to its status as the world’s largest CO2 emitter.
Yet, despite ongoing use of oil, gas and coal, heavy investment in electrification and renewables is helping to stabilise China’s overall emissions. Electricity accounted for 28% of the country’s energy consumption in 2024, compared to only 22% in the US and 21% in Europe.5 Meanwhile, nearly 48% of passenger car sales in 2024 were for electric vehicles (EVs)– more than double the percentage in Europe. China also boasts the world’s largest high-speed rail network, with 45,000 km of electric-powered high-speed rail lines.6
FIG 1. China first: the red dragon’s global leadership in green technologies7
28%
electricity in the energy mix – more than in the US or Europe
90%
share of solar-panel manufacturing
70%
of EV and energy-storage battery production
90%
of rare-earths processing capacity
70%
of mining operations for rare earths
48%
EV passenger car sales in 2024
The world’s first ‘electrostate’?
China’s long-term strategy is to gain full control over its core needs, from food and energy to industry, supply chains and technology. Energy security has long been a priority, and its level of preparation is far higher than in the US or Europe.
As a developing nation, China has been able to leapfrog older, more polluting energy technologies to make rapid progress in electrifying its economy. For example, its strong EV uptake is partly due to a relatively small incumbent fleet of internal combustion engine vehicles.
As well as making strong progress on electrification domestically, China has aggressively built out its clean energy supply chain in a bid for strategic control of the global energy transition. Recent policy shifts have tightened export controls, reinforcing China’s geopolitical leverage in this respect.
China has aggressively built out its clean energy supply chain in a bid for strategic control of the global energy transition
Chinese companies currently produce around 90% of global solar panels8, 70% of batteries9, and between 60% -70% of wind turbines10. China also controls 70% of mining11 and 90% of processing12 for the rare earth minerals that are critical in EVs, wind turbines, and defence systems.
Meanwhile, Chinese innovation has driven significant improvements in power density and cost that will enable batteries to increasingly occupy two vital roles in the energy supply chain: transport and energy storage systems (ESS). Chinese firms CATL and BYD13 dominate the global battery market, with a combined 57% market share.14
All of this ensures China’s manufacturing primacy in the global market for clean technologies (see Figure 2), opening up potential investment opportunities. China is the largest country exposure in our TargetNetZero Emerging Markets equity strategy. For this low-tracking-error portfolio, this reflects the country’s weight in the benchmark but also our view of the progress being made by companies across the economy towards decarbonisation: our China exposure accounts for 25% of the active risk taken by the strategy.15
For our Asia High Conviction and Planetary Transition equity strategies, which focus on growth opportunities and the energy transition respectively, China offers attractive companies. This is particularly apparent in the batteries sector which, unlike solar, is not burdened by overcapacity.
FIG 2. China dominated global installed manufacturing capacity for clean tech in 202316
A time-shifting pioneer in electricity generation and consumption
As well as electrification, China is strongly focussed on grid flexibility. It is rapidly increasing its ability to time-shift power at a national level, adjusting when electricity is either consumed or stored to better channel it towards demand.
Time-shifting is especially important for maximising the viability of intermittent energy sources like wind and solar, avoiding waste during periods of oversupply and reducing strain during peak demand. Traditionally, efforts have focussed on incentives to increase demand at quieter times, often through pricing. However, with the development of more efficient batteries, energy storage has the potential to time-shift supply.
According to the China Energy Storage Alliance (CNESA), the country’s energy storage capacity surpassed 100 gigawatts (GW) in H1 2025 – enough to power about 219 million homes in the European Union for one hour. Thanks to strong policy support, the CNESA projects it to reach at least 236 GW by 2030.17 The vast majority of this capacity is deployed not just for backup but to store excess power for release during times of peak demand.
As well as grid-scale energy storage, China is investing in a range of other measures to enable time-shifting and boost efficiency. These include:
Smart grids and AI to predict demand, adjust loads and optimise flow
Virtual power plants to aggregate and despatch flexible loads
Grid reforms to allow interregional power transfer of surplus energy
The use of EVs, heat pumps and other technology as distributed storage.
Together, these measures aim to provide better grid stability, improved efficiency and lower emissions – which are crucial to becoming an electrostate.
The world’s other two major economic powers are also installing renewables at scale for energy security, stability and strategic reasons – though not at the same level as China.
United States. The Inflation Reduction Act helped the US commit well over USD 500 billion to clean energy between 2020 and August 2023 – far more than any other country.18 Despite the current government’s posturing, policymakers across the political spectrum have shared goals of increasing energy reliability and security, and out-competing China. However, the US is significantly behind China in ESS buildout and largely reliant on Korean and Japanese battery technology. Supported by oil and gas independence, US transportation is still heavily reliant on fossil fuels, with limited EV uptake.
European Union. Europe continues to target net zero by 2050, with its Fit for 55 package designed to reduce emissions by 55% by 2030. Germany is focussed on wind power, green hydrogen and industrial electrification, while France aims to diversify from its strong nuclear power sector and incentivise EV uptake. Meanwhile, Spain and Italy are investing heavily in solar, energy efficiency and clean transport.
Case study: CATL is leading the EV and energy storage revolution
CATL13, or Contemporary Amperex Technology Co. Ltd, specialises in designing, manufacturing and selling the lithium-ion batteries that are essential for EVs and ESS. Though it was founded less than two decades ago, it commands more than 38% of worldwide market share, and its products power more than 17 million EVs and support more than 1,700 energy projects worldwide.
Covered by our Asia High Conviction and Planetary Transition equity teams, CATL’s key strengths lie in its full-chain R&D capabilities, lean manufacturing, advanced product portfolio and global scale. It operates 13 manufacturing bases and six R&D centres, with 20,000 employees across a presence in 64 countries.
About half of the global R&D budget deployed by the industry globally is spent by CATL. Its proprietary technologies, like the Shenxing and Qilin batteries, offer industry-leading performance in charging speed, safety and energy density. CATL is also the only company in the sector to have three so-called ‘lighthouse site’ factories, which are manufacturing sites judged by McKinsey and the World Economic Forum to be applying industry 4.0 technologies at scale to significantly improve efficiency, quality and sustainability, thereby transforming business models and value chains. (Of the 189 ‘lighthouses’ worldwide, 78 are in China.)
CATL maintains strong partnerships with top global automakers including BMW, Tesla, and Volkswagen.13 Its vertical integration, from raw materials to battery production and recycling, ensures cost control and supply security to consistently generate superior operating margins.
Green light for the energy transition
The energy transition is not losing power: rather, it is fuelled by the efficiencies and increasing cost-competitiveness of clean technologies. Although it is snarled by politics in some parts of the world, manufacturing capacity and installations of renewables and battery storage continue to grow – as does electrified transportation. China is leading this shift, achieving global leadership in the solar, batteries and rare-earths supply chains as it seeks energy security through clean electrification.
In Chinese culture, red symbolises the fire element, inspiring vitality and prosperity. The nation’s prowess in green energy should be seen as bringing similarly good fortune.
13 Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document.
14 Source: LOIM Asia Equity research.
15 Source: LOIM at 1 September 2025. Holdings and/or allocations are subject to change.
This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice.
