China hopes to dominate the next phase of green innovation

CHINA HAS revolutionised some green technologies in recent years. Spurred by generous government subsidies and cut-throat competition, its companies worked out how to make solar panels, batteries and electric cars efficiently and ever more cheaply. Today China dominates global production of all three. Cheap Chinese technology, now being rapidly rolled out across the world, is helping to decarbonise electricity production, road transport and more.

The next phase of green innovation, though, is trickier. Cement factories, chemical plants and steel mills—all big sources of carbon emissions—need large amounts of heat to work, and burning fossil fuels is still the most practical way to provide it. Big ships and planes, meanwhile, are difficult to power with batteries. Reducing emissions from these so-called “hard-to-abate” sectors may require new technology. In 2025 Chinese firms will increasingly be trying to develop it.

One approach is to capture the carbon emitted by factories before it enters the atmosphere and to store it. This is technically possible; the problem is doing it cheaply enough to spur wide adoption. Chinese scientists have filed three times as many patents in “carbon capture and storage” (CCS) methods as their American counterparts. In 2024 Tencent, a tech giant, invested 100m yuan ($14m) in a dozen promising CCS technologies. China Energy Investment, a state-owned company, is building a demonstration CCS project at a chemicals plant that aims to capture 1m tonnes of carbon a year by the end of 2025.

Hydrogen is another area of focus. It can be used to heat a steel mill or power a truck with no greenhouse-gas emissions. The difficulty is producing the gas in a clean way (making what is known as “green” hydrogen) rather than by using fossil fuels (“brown” hydrogen). This can be done using renewable energy to power a machine called an electrolyser, which splits water molecules into hydrogen and oxygen. But at the moment the hydrogen produced in this way is still too expensive for most commercial uses.

China is well positioned to push costs down. It already makes about 40% of the world’s electrolysers, and does so more cheaply than competitors. And thanks to years of splurging on solar panels and wind turbines, it also has plenty of renewable energy. Inner Mongolia, a vast region of northern China with abundant wind and sunlight, plans to make 480,000 tonnes of green hydrogen in 2025—not much compared with the amount of brown hydrogen China makes, but a start.

Other countries, including India and Brazil, also hope to become green-hydrogen superpowers. But China’s skill in building infrastructure will give it a further boost. Officials are building pipelines to transport hydrogen to industrial centres. Shenzhen, a tech hub in the south of the country, already has a fleet of hydrogen-powered buses. By the end of 2025, it hopes to become China’s “hydrogen capital”, setting international standards for the nascent industry.

The success of such ventures matters a great deal to China. It intends to eliminate net emissions, and become carbon neutral, by 2060. But its steel industry makes as much of the metal as the rest of the world combined. Its chemicals and shipmaking industries, too, are the world’s largest.

These new green technologies would have more than just domestic appeal, however. They would also create valuable new export markets. Chinese progress in these areas will lead to more grumbling from its trading partners. Western firms are already struggling to compete with China’s existing green tech. Some worry that the global energy transition has become too dependent on China. It may soon become even more so. ■