Ilaria Mazzocco is a Senior Fellow in Chinese Business and Economics at the Center for Strategic & International Studies. She holds a PhD from the Johns Hopkins School of Advanced International Studies, where her dissertation investigated Chinese industrial policy by focusing on electric vehicle promotion efforts and the role of local governments. Our questions are in bold, her answers in quotation marks.
What is China’s current energy mix?
“Let’s go straight to the source for this question.”
Has it changed much in the past ten years?
“The share of coal has declined significantly, from almost 70% a decade ago to just under 57% in 2020. Meanwhile, renewables like solar and wind, which are now growing at a rapid pace, were negligible 10 years ago. Of course, these are shares of the total, and don’t paint the whole picture. If you look at absolute numbers, coal consumption has grown. We’ve seen similar trends in the electricity mix, where coal holds an even larger share.”
How do you expect it to change in response to China’s climate commitments?
“I think we’ll continue to see growth in China’s renewables sector and their share, alongside the shares of nuclear and gas, will increase. Coal’s share will almost certainly continue to decrease. The real challenge will be to decrease absolute coal consumption as well. I don’t expect the government to make any moves to actively reduce coal capacity before the next five year plan—in fact, coal capacity has expanded over the last two years.”
What tools does the central government use to influence the sector?
“The central government has a variety of tools at its disposal. On the technology side, industrial policy has been crucial for the development and commercialization of solar and wind, as well as electric vehicles. We’ll likely see similar investments in green hydrogen, carbon capture and storage, and perhaps some other technologies like concentrated solar. There are other tools at the government’s disposal, like mandates to replace coal-burning furnaces, or targets for provinces and industries to peak emissions.
Other tools that will be increasingly important are power sector reforms (which have been proceeding very slowly) and carbon markets development (which will take time to have an impact on emissions). Local governments are also very important in the implementation process. Providing them with the right mix of political incentives to decarbonize is one of the main challenges that the central government needs to solve.”
How innovative is China when it comes to green energy?
“China’s role has been crucial in bringing production to scale and reducing costs for technologies like solar and wind. For those industries, China’s innovation lies mostly in the production process. When it comes to EVs and batteries, where Chinese companies are operating closer to the innovation frontier, we may see more product and design innovation as well.”
What explains China’s recent electric vehicle boom?
“This is explained by a mix of factors. Government policy over the past decade has been central to helping the EV sector get off the ground and this coincided with a moment in which the technology was advancing globally. But at this stage, subsidies are no longer believed to play a crucial role in getting consumers to buy electric cars. Companies are offering a wide variety of vehicles that Chinese citizens are happy to purchase.”
Do you expect Chinese electric vehicle makers to gain significant market share in Europe and North America?
“I expect we’ll see many more Chinese EVs in Europe in the next two years. But selling cars isn’t as simple as cellphones, it requires offering warranties and vehicle maintenance to customers, as well as financing in many cases. I see more of an uphill battle for Chinese EV manufacturers in the US because of the political situation as well as the restrictions on credits set in the inflation reduction act. Plus, the North American market is far smaller and slower than the European one.”
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