China best placed to profit from the world’s move towards a lower carbon future, says HSBC report

Eric Ng
·4-min read

China, a dominant force in the manufacture of clean-energy equipment, is best placed to profit from the world’s drive towards decarbonisation, according to research by HSBC.

The bank assessed 77 countries on their resilience to climate risks based on 49 factors including their move away from fossil fuels, adaptation to climate change and capacity to profit from low-carbon technology deployment.

China ranked 24th overall when it came to its resilience to climate risks.

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It is expected to compete with the US for leadership in the last category, which takes into account the ease with which a country’s industrial base switches towards green economy opportunities, endowment of commodities needed for low-carbon technology deployment, the number of companies establishing climate policies and their level of innovation.

“Overall, we find China best-placed to make profits as the world moves towards a lower carbon future, followed by France,” said HSBC analysts Ashim Paun, Lucy Acton and Paul Bloxham in a report published on Monday.

“The US and China are earning substantial climate solutions revenues already. We expect China and the US to be in a race to deliver an energy transition and climate resilience leadership.”

The US is in top position for revenues earned from low carbon solutions, above China, which is followed by Japan. However, China saw the highest growth rate in revenues over the five years to 2019, followed by Japan and then the US, the report showed.

While the United States has developed advanced technology in industry segments such as wind and nuclear, China’s dominance and unmatched production scale in renewable energy gears, nuclear reactors and batteries means it enjoys unique cost advantages, according to the analysts.

China is the world’s largest manufacturer of wind turbines and dominates global solar panels and materials production. Around two thirds of the photovoltaic panels installed globally are produced there, said to a March 18 report by energy and metals consultancy Wood Mackenzie.

China also leads the supply and processing of most of the raw materials needed for batteries used in electric vehicles. Three quarters of global lithium-ion battery production, half of all electric vehicles and almost 70 per cent of all solar panels are made in the country.

China is also catching up in technology development. It had the highest absolute number of patents granted in sectors relevant to low-carbon transition from 2015 and 2019, followed by Japan, according to the HSBC report.

“If China can replicate its current global market share in battery and solar-panel production across the entire future value chain of clean energy, it would transform global energy supply, trade and industry,” said Wood Mackenzie’s senior economist Zhou Yanting.

In the wind power equipment industry, China and the US remained the world’s largest markets for new onshore wind farms installations, according to the latest annual report published by the Global Wind Energy Council last week.

The world’s two largest economies together boosted their market share by 15 per cent to 76 per cent last year, driven by an installation rush ahead of the phasing out of government subsidy schemes, the council’s head of strategy and market intelligence Feng Zhao noted.

Being a leader in the renewable energy industry would help create much needed skilled jobs in China, whose economic growth is increasingly driven by consumption and knowledge-based activities.

In overall rankings, China was placed 24th of the 77 countries ranked from greatest resilience to the most vulnerable to climate risk. Sweden ranks first followed by France, Finland, Germany, and the United States. Nigeria was deemed the most vulnerable, behind Bangladesh, Cote d’Ivoire, Tanzania and Tunisia.

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