6 steps democracies must take to match China on climate action
News Summary
Global energy investment is projected to reach US$3.3 trillion in 2025, with US$2.2 trillion directed towards clean technologies, double the amount flowing into fossil fuels. Despite these impressive figures, a crisis of confidence is unfolding in the clean energy sector. In the first half of this year, over US$22 billion in clean energy projects were cancelled or scaled back in the United States, leading to approximately 16,500 job losses, including battery facilities, storage systems, and electric vehicle factories. Major investors are retreating from net-zero alliances, and energy companies like Equinor are writing down hundreds of millions in offshore wind investments due to regulatory uncertainty. The core issue is not technological inadequacy or lack of capital, but politics. Eroding political will, driven by populist pressures, is reshaping climate policy worldwide. Leaders are walking back commitments, framing climate action as incompatible with affordability and energy security. The most significant threat to net-zero ambitions today is not engineering challenges but the systematic dismantling of policy frameworks that made the transition viable.
Background
In 2025, the world is at a critical juncture for energy transition. While clean energy investment has reached record highs, its progress faces significant political headwinds. The article highlights project cancellations and write-downs in the US and Europe, directly linking these to the rise of populism and the erosion of climate policy by political cycles. Under President Donald J. Trump's administration, US policies often favor deregulation and prioritize traditional energy sectors, contrasting with previous administrations' clean energy push. This policy uncertainty exacerbates investor concerns regarding clean energy projects, especially those requiring substantial long-term capital, such as offshore wind. Globally, populist politicians exploit the disconnect between the short-term costs and long-term benefits of climate policies, framing them as elite agendas, further undermining political support for climate action.
In-Depth AI Insights
Does the current 'crisis of confidence' in clean energy investment signal a deeper structural shift rather than a temporary fluctuation? - Yes, the crisis of confidence described in the article is far from a short-term phenomenon; it exposes deep-seated structural weaknesses in how democracies approach climate change. This weakness stems from the inherent limitations of political cycles, where short-term electoral pressures often override long-term strategic investments. - The rise of populism is not accidental; it reflects voter sensitivity to immediate economic costs over abstract, long-term environmental benefits. This makes clean energy policies vulnerable in democratic systems, susceptible to political winds, especially during periods of economic slowdown or increased cost-of-living pressures. - In contrast, non-democratic states like China may possess an institutional advantage in implementing long-term, large-scale industrial policies, better able to withstand short-term political interference, thus potentially surpassing democracies in policy consistency and investment stability in the clean energy sector. What are the strategic implications of the scaling back and disinvestments in clean energy projects in the US and Europe for the global energy transition pathway and technological leadership? - Policy uncertainty in the US and Europe will likely damage the competitiveness of their clean energy industries and could diminish their technological leadership in the global energy transition. Investors seek stability and predictability, and policy swings will drive capital towards markets with greater certainty. - This could accelerate the shift of the clean energy supply chain's center of gravity towards Asia, particularly China. China already dominates global solar PV, battery, and EV manufacturing, and if Western policy support falters, their catch-up pace in emerging clean technologies like hydrogen and carbon capture might slow, further widening the gap with China. - In the long run, this trend could lead to a 'two-speed transition' scenario: some democracies slow their pace due to political infighting, while countries like China continue rapid development driven by stable policy support and strong industrial bases, thereby altering the geopolitical landscape of global energy technology. How will President Trump's 'America First' energy policies, conflicting with global climate action, impact international cooperation and investor risk assessment? - The Trump administration's energy policies, favoring fossil fuels and skepticism towards international climate agreements, will exacerbate fragmentation in global climate governance. This will not only weaken the effectiveness of international frameworks like the Paris Agreement but also expose cross-border clean energy investments to higher policy and geopolitical risks. - For investors, this means a need for more granular assessment of climate policy risks across different countries and regions. When investing in clean energy in politically cyclical markets like the US and Europe, the possibility of policy reversals must be factored in with a higher risk premium. - This conflict could also lead to further fragmentation of global supply chains, as countries, driven by energy security and strategic autonomy concerns, may increasingly favor developing indigenous clean energy value chains rather than relying on efficient global division of labor, ultimately potentially increasing clean energy costs and decreasing transition efficiency.