China’s clean tech leadership has reduced costs, but concerns about over-reliance risks are pushing other nations to protectionist policies, potentially slowing global progress
Carbon pricing and technology progress can accelerate the global energy transition, according to a new report. The report titled “Global trade in the energy transition: Principles for clean energy supply chains & carbon pricing” by Energy Transitions Commission (ETC) set out principles for developing domestic supply chains.
China’s Dominance
The report noted that the cost of clean energy has plummeted in the last decade. Solar PV module prices have dropped 94% since 2011, lithium-ion batteries fell 92% since 2010, and in 2024, almost two-thirds of electric vehicles sold in China were cheaper than Internal Combustion vehicles of equivalent size and quality.
China, now the leader in clean technology, holds market share in multiple clean technologies not only due to cheap labour costs but also because of low capital costs and technological innovation, according to the report. This dominance has led other countries to adopt protectionist policies, which may hinder global progress towards a net-zero transition, the report states.
Way Forward
The report suggested that the countries should aim for diversified supply chains rather than complete self-reliance, need to clarify different dimensions of security— national and economic— with different implications in different sectors, tailor policy for technology and push for nearshoring in sectors where cost-competitive domestic production can be achieved, and work with China to increase climate finance flows to low-income countries.
Adair Turner, Chairperson of ETC, said, “There are economic and security-related reasons for seeking to develop domestic supply chains. Well-designed policy can ensure that those objectives are met in a way that drives further technological progress and cost reduction.”
Carbon pricing is required to make decarbonisation in carbon-intensive sectors such as steel, cement, chemicals, and shipping economically feasible. While 53 countries now have some form of carbon pricing, covering over 20% of global emissions, only the EU has prices high enough to significantly influence the economics of decarbonisation, said the study.
The study suggested that carbon border adjustment mechanisms (CBAMs), a tariff policy based on the greenhouse gas emissions of imported goods’ production, are essential to support decarbonisation and are the only way by which developed countries can take responsibility for imported emissions until globally agreed carbon prices are applied to carbon-intensive sectors.
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