Cover Story: China’s Last Big Bet on Its Energy Reform in Race to Cap Carbon Emissions

China is entering a critical five-year period as it strives to peak its carbon emissions by 2030—a key goal within the broader energy transformation reshaping its economy and impacting global energy markets. The upcoming 15th Five-Year Plan (2026-2030) is considered the final push for China, the world’s largest energy consumer and producer, to fulfill its pledge to cap emissions, requiring both a shift away from coal dependency and a leap towards renewables, advanced technologies, and market reforms. Beijing’s efforts are not solely about combating climate change, but also about strengthening energy security, developing technological autonomy, and fostering new drivers of economic growth. The policies and decisions implemented during this period will likely transform global supply chains, especially in sectors like electric vehicles, hydrogen, and advanced manufacturing. [para. 1][para. 2][para. 3]

In the past decade, China’s energy mix has shifted significantly: the share of coal in primary energy consumption has fallen from 64% in 2015 to 53.2% in 2024, while the share of clean energy sources—including natural gas, wind, solar, hydro, and nuclear—has increased by 10.7 percentage points to 28.6%. Electrification and the embrace of clean technologies have enabled China to become a global leader in electric vehicles, solar panels, and lithium batteries, creating the world’s largest power-generation and clean-energy system. New energy installations are projected to double by 2030, with total energy consumption expected to rise 20% by 2035 to 7.1-7.2 billion tons of standard coal equivalent. The energy sector accounts for about 75% of China’s carbon emissions, underscoring the urgent need for a more flexible, resilient energy system that reduces dependence on legacy industries. [para. 4][para. 5][para. 6][para. 7][para. 8][para. 9]

Despite progress, coal remains a central challenge. Although its share in energy consumption has decreased, coal still made up 53.2% in 2024 and contributed about 42% of total carbon emissions. Coal production reached a record high of 4.76 billion tons in 2024, driven largely by power generation, steel, and chemicals. Momentum is shifting, however; experts expect coal's role to transition from primary fuel to backup support for intermittent renewables, with consumption likely plateauing by around 2028. Meanwhile, China’s clean energy investments hit $625 billion in 2024—one-third of the global total—with over 80% of new power investment directed to renewables. Installed wind and solar capacity reached 1.68 billion kilowatts by July 2024, making up nearly half the global total. Experts predict China will add 200 million kilowatts of wind and solar capacity annually through 2030, aiming for over 3 billion kilowatts in total. [para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17]

Transitioning to renewables has strained China’s state-controlled power grid, highlighting the need for market-oriented electricity reform and technological upgrades. Bottlenecks from insufficient grid investment and storage have lowered the utilization rates of renewables; in 2024, wind and solar made up 42% of installed capacity but only 18% of electricity produced. Over 60% of power is now traded in market-based schemes—double the rate in 2016—yet challenges remain due to local protectionism and limited grid openness. The next five years are expected to see deeper reforms and stronger integration of smart grids and demand-side management. [para. 18][para. 19][para. 20][para. 21][para. 22][para. 23][para. 24]

Technological innovation is at the core of China’s future strategy. Investments in artificial intelligence, advanced solar cells, green hydrogen, solid-state batteries, and small modular nuclear reactors are rising, with R&D spending at some state-owned firms climbing to 4% of revenue. However, cost barriers remain, and fierce domestic competition has caused overcapacity and price wars in industries like photovoltaics and batteries. To address a saturated domestic market, Chinese companies are accelerating overseas expansion, but face risks including global trade barriers and geopolitical tensions. The success of China’s next five-year plan will profoundly influence its own economic trajectory and the global climate agenda. [para. 25][para. 26][para. 27][para. 28][para. 29][para. 30][para. 31][para. 32][para. 33][para. 34][para. 35]