Yao Zhe is global policy advisor for Greenpeace East Asia.
“Overcapacity”, a geeky economic term, has recently become the new buzzword for international discussion around China’s solar and electric vehicle industries. It is also becoming one of the thorniest issues in China’s relations with other major economies.
Notably, the word was mentioned five times in the G7 Leaders Communiqué released last week, with the G7 countries framing it collectively as a global challenge.
It is a debate that was initially sparked by US Treasury Secretary Janet Yellen during her April visit to Beijing. According to her, China’s cleantech industry has excess capacities that cannot be absorbed domestically, leading to exports at depressed prices. And she stressed that this should be a concern not only for the US, but also for Europe and other emerging markets.
China strongly disagreed with this claim, while Yellen’s concern resonated in the EU, which has long focused on China’s market dominance. In short, there is an overcapacity of “overcapacities”, with neither side finding identical terms of reference. But as this debate is a harbinger of how climate solutions and political agendas will interweave, it’s worth parsing out some lessons for each side, on their own terms.
The US’ “overcapacity” claim as presented by Yellen is a non-starter in China.
China’s clean energy industry is an important point of pride internationally and a source of legitimacy domestically for Beijing. From that perspective countering the “overcapacity” claim is both emotionally and strategically important.
Strategically, this claim is being used to justify trade measures and tariffs against China’s clean energy products. Emotionally, the cleantech industry is a modern-day success story of China’s entrepreneurship and innovation. In China’s public discourse, the US “overcapacity” claims lands as a rejection of that success.
The result is a political debate in which – by design – no side can convince the other. And the lesson? This posturing is at odds with US-China climate diplomacy as we’ve known it to function in the past. Whatever objectives this approach serves, it does not include closer climate collaboration between the US and China, even as multilateral climate action at the UN level still requires them to take action in concert.
In China, discussion on “overcapacity” emerged from an ongoing conversation about how to manage investment hype. And the answer lies on the demand side.
For investors inside China at a time of challenging economics, few industries are as attractive as the clean energy industry. And business leaders have focused on the risks of hot money and breakneck expansion of clean energy manufacturing capacity for some time now, particularly in the solar industry.
This was probably the origin of “overcapacity”. But in China, this has been a familiar, almost perennial discussion of investment and industrial cycles. While the US argument equates exports to overcapacity, Chinese companies argue that it is demand that determines overcapacity, and they make investment and expansion decisions based on projections of both domestic and global demand.
That said, the size of China’s domestic market means it will remain the “base” for Chinese manufacturers. In the overseas market, the “overcapacity” claim underscores the complexity and uncertainties Chinese companies face.
For Chinese policymakers, one obvious response to the new market dynamics should be taking domestic demand to new levels. That means addressing lingering questions for China’s renewable energy future – namely, how to resolve the impact of coal. China’s power market was designed for a system dependent on coal, but it needs reform to allow wind and solar to take the central role. Injecting new political momentum to accelerate the reform will be key.
The EU has long been concerned about China’s market dominance, and the “overcapacity” debate is pushing it to decide its role in this trilateral trade and climate dynamic.
Even before this debate erupted, the EU had already begun, subtly, to diversify supply chains and build its own industrial strength, reducing dependence on Chinese products. Last week, the EU announced a maximum tariff of 38% on imported Chinese-made electric vehicles, concluding that Chinese EV makers are benefiting from “unfair subsidies”.
At this stage, it’s still unclear if this is the end of the EU’s low-key approach to date. Cultivating an EU-based clean industry hub without compromising the global response to climate change is a challenge, especially as the EU positions itself as a climate leader.
Entering the fray of US-China tension only makes this feat more complex, especially given uncertainties on the US end in an election year. How the EU approaches this climate and trade nexus will ultimately shape the trilateral dynamic among the world’s three largest carbon emitters in the coming years.
For China, where relations with the EU and other countries are concerned, it’s worth taking a step back and looking at the hidden messages in the “overcapacity” debate. Other countries want more than just Chinese products.
Climate leadership is not a buyer-seller relationship, but one between partners who want solutions that create local jobs, develop opportunities, and enable native development of a sustainable future.
China should see its role in the global clean transition as more than a manufacturing hub. The transition requires tools, technology, finance and know-how, and China has much to offer. It is time for China to think more creatively about how to leverage its industrial advantages to provide the solutions with which the world is currently under-supplied.
The post Lessons from rising tensions around “overcapacity” in China’s cleantech industry appeared first on Climate Home News.
Lessons from rising tensions around “overcapacity” in China’s cleantech industry
Climate Change
Hurricane Helene Is Headed for Georgians’ Electric Bills
A new storm recovery charge could soon hit Georgia Power customers’ bills, as climate change drives more destructive weather across the state.
Hurricane Helene may be long over, but its costs are poised to land on Georgians’ electricity bills. After the storm killed 37 people in Georgia and caused billions in damage in September 2024, Georgia Power is seeking permission from state regulators to pass recovery costs on to customers.
Climate Change
Amid Affordability Crisis, New Jersey Hands $250 Million Tax Break to Data Center
Gov. Mikie Sherrill says she supports both AI and lowering her constituents’ bills.
With New Jersey’s cost-of-living “crisis” at the center of Gov. Mikie Sherrill’s agenda, her administration has inherited a program that approved a $250 million tax break for an artificial intelligence data center.
Amid Affordability Crisis, New Jersey Hands $250 Million Tax Break to Data Center
Climate Change
Curbing methane is the fastest way to slow warming – but we’re off the pace
Gabrielle Dreyfus is chief scientist at the Institute for Governance and Sustainable Development, Thomas Röckmann is a professor of atmospheric physics and chemistry at Utrecht University, and Lena Höglund Isaksson is a senior research scholar at the International Institute for Applied Systems Analysis.
This March scientists and policy makers will gather near the site in Italy where methane was first identified 250 years ago to share the latest science on methane and the policy and technology steps needed to rapidly cut methane emissions. The timing is apt.
As new tools transform our understanding of methane emissions and their sources, the evidence they reveal points to a single conclusion: Human-caused methane emissions are still rising, and global action remains far too slow.
This is the central finding of the latest Global Methane Status Report. Four years into the Global Methane Pledge, which aims for a 30% cut in global emissions by 2030, the good news is that the pledge has increased mitigation ambition under national plans, which, if fully implemented, could result in the largest and most sustained decline in methane emissions since the Industrial Revolution.
The bad news is this is still short of the 30% target. The decisive question is whether governments will move quickly enough to turn that bend into the steep decline required to pump the brake on global warming.
What the data really show
Assessing progress requires comparing three benchmarks: the level of emissions today relative to 2020, the trajectory projected in 2021 before methane received significant policy focus, and the level required by 2030 to meet the pledge.
The latest data show that global methane emissions in 2025 are higher than in 2020 but not as high as previously expected. In 2021, emissions were projected to rise by about 9% between 2020 and 2030. Updated analysis places that increase closer to 5%. This change is driven by factors such as slower than expected growth in unconventional gas production between 2020 and 2024 and lower than expected waste emissions in several regions.
Gas flaring soars in Niger Delta post-Shell, afflicting communities
This updated trajectory still does not deliver the reductions required, but it does indicate that the curve is beginning to bend. More importantly, the commitments already outlined in countries’ Nationally Determined Contributions and Methane Action Plans would, if fully implemented, produce an 8% reduction in global methane emissions between 2020 and 2030. This would turn the current increase into a sustained decline. While still insufficient to reach the Global Methane Pledge target of a 30% cut, it would represent historical progress.
Solutions are known and ready
Scientific assessments consistently show that the technical potential to meet the pledge exists. The gap lies not in technology, but in implementation.
The energy sector accounts for approximately 70% of total technical methane reduction potential between 2020 and 2030. Proven measures include recovering associated petroleum gas in oil production, regular leak detection and repair across oil and gas supply chains, and installing ventilation air oxidation technologies in underground coal mines. Many of these options are low cost or profitable. Yet current commitments would achieve only one third of the maximum technically feasible reductions in this sector.
Recent COP hosts Brazil and Azerbaijan linked to “super-emitting” methane plumes
Agriculture and waste also provide opportunities. Rice emissions can be reduced through improved water management, low-emission hybrids and soil amendments. While innovations in technology and practices hold promise in the longer term, near-term potential in livestock is more constrained and trends in global diets may counteract gains.
Waste sector emissions had been expected to increase more rapidly, but improvements in waste management in several regions over the past two decades have moderated this rise. Long-term mitigation in this sector requires immediate investment in improved landfills and circular waste systems, as emissions from waste already deposited will persist in the short term.
New measurement tools
Methane monitoring capacity has expanded significantly. Satellite-based systems can now identify methane super-emitters. Ground-based sensors are becoming more accessible and can provide real-time data. These developments improve national inventories and can strengthen accountability.
However, policy action does not need to wait for perfect measurement. Current scientific understanding of source magnitudes and mitigation effectiveness is sufficient to achieve a 30% reduction between 2020 and 2030. Many of the largest reductions in oil, gas and coal can be delivered through binding technology standards that do not require high precision quantification of emissions.
The decisive years ahead
The next 2 years will be critical for determining whether existing commitments translate into emissions reductions consistent with the Global Methane Pledge.
Governments should prioritise adoption of an effective international methane performance standard for oil and gas, including through the EU Methane Regulation, and expand the reach of such standards through voluntary buyers’ clubs. National and regional authorities should introduce binding technology standards for oil, gas and coal to ensure that voluntary agreements are backed by legal requirements.
One approach to promoting better progress on methane is to develop a binding methane agreement, starting with the oil and gas sector, as suggested by Barbados’ PM Mia Mottley and other leaders. Countries must also address the deeper challenge of political and economic dependence on fossil fuels, which continues to slow progress. Without a dual strategy of reducing methane and deep decarbonisation, it will not be possible to meet the Paris Agreement objectives.
Mottley’s “legally binding” methane pact faces barriers, but smaller steps possible
The next four years will determine whether available technologies, scientific evidence and political leadership align to deliver a rapid transition toward near-zero methane energy systems, holistic and equity-based lower emission agricultural systems and circular waste management strategies that eliminate methane release. These years will also determine whether the world captures the near-term climate benefits of methane abatement or locks in higher long-term costs and risks.
The Global Methane Status Report shows that the world is beginning to change course. Delivering the sharper downward trajectory now required is a test of political will. As scientists, we have laid out the evidence. Leaders must now act on it.
The post Curbing methane is the fastest way to slow warming – but we’re off the pace appeared first on Climate Home News.
Curbing methane is the fastest way to slow warming – but we’re off the pace
-
Greenhouse Gases7 months ago
Guest post: Why China is still building new coal – and when it might stop
-
Climate Change7 months ago
Guest post: Why China is still building new coal – and when it might stop
-
Greenhouse Gases2 years ago嘉宾来稿:满足中国增长的用电需求 光伏加储能“比新建煤电更实惠”
-
Climate Change2 years ago
Bill Discounting Climate Change in Florida’s Energy Policy Awaits DeSantis’ Approval
-
Climate Change2 years ago
Spanish-language misinformation on renewable energy spreads online, report shows
-
Climate Change2 years ago嘉宾来稿:满足中国增长的用电需求 光伏加储能“比新建煤电更实惠”
-
Climate Change Videos2 years ago
The toxic gas flares fuelling Nigeria’s climate change – BBC News
-
Carbon Footprint2 years agoUS SEC’s Climate Disclosure Rules Spur Renewed Interest in Carbon Credits
