Chronic. While China’s investment in renewable energy ranks first in the world, China’s overseas investment in the energy sector is mainly in fossil fuels. Since 2006, China, the largest global emitter of carbon across all sectors (26.8% of the total), has become the largest global investor in the energy sector.
Certainly, in 2017, it alone made almost half of global investments in renewable energies (notably solar and wind), but the characteristics of these investments are very different at the domestic level and at the international level. Is this a form of duplicity in terms of decarbonization, or are there deeper and more structural reasons? (“Clean at home, polluting abroad: the role of the Chinese financial system’s differential treatment of state-owned and private enterprises”Mathias Lund Larsen and Lars Oehler, Climate Policy n°23/1, 2023).
Significant structural disadvantages
According to the two Danish researchers, the share of renewable energies in Chinese investments in electricity production is 77% at the national level (excluding large and medium hydroelectric capacities), while it is only 22% in abroad, for example, along the “new silk roads”. The second major contribution of this article is to study the institutional complementarities between the energy sector and its financial environment.
The authors show that in addition to general obstacles to renewable energy development, such as higher upfront costs and different revenue cycles, Chinese renewable energy companies face significant structural disadvantages compared to companies in the conventional energy sector in terms of access to financing for their investments abroad.
The underlying reason is that the latter are largely state-owned, while the former are mainly private. This disadvantage is materialized by the Chinese financial system’s preference for state-owned enterprises. Certainly, some public companies are diversifying into renewables, but this is still relatively minor.
No energy transition without financial sector reform
What lessons can we learn from this? In the Chinese case, there are several possible avenues for reform at the level of the main financial players to restore a balance in favor of renewable energies, through greater (and not less) intervention by the State. Among the various political options, two stand out in particular.
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