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The world’s biggest polluter is also the world’s top generator of renewable energy.
Ahead of President Biden’s meeting with Chinese President Xi Jinping in San Francisco on Wednesday, the U.S. and China released a joint statement that represents a breakthrough in the two countries’ climate change negotiations. Most notably, the Asian superpower has finally agreed to set concrete targets to reduce emissions across its economy.
The statement asserts that the U.S. and China will work together and with other parties at the upcoming United Nations climate summit in Abu Dhabi, known as COP28, to “rise up to one of the greatest challenges of our time for present and future generations of humankind.”
Underlying the summit is a stark reality: The world will not be able to limit global warming to internationally agreed-upon levels if China, the world’s largest producer of greenhouse gases, does not increase its ambition. The country is now responsible for about a third of annual global carbon emissions. China’s combustion of coal alone accounts for 25% of all energy-related emissions in the world.
Yet China is also the world’s top generator of renewable energy and the foremost manufacturer of much of the technology undergirding the transition. Come with me on a tour of the complex, contradictory state of China’s energy transition in eight eye-popping charts.
China’s climate pledges to date have been vague. The country has said its carbon emissions will peak before 2030, for instance, but has not set a firm target for when or at what level — and the target does not apply to other planet-warming gases like methane. But according to an analysis by Climate Action Tracker, under current policies, China’s annual emissions will peak around 2025 and then plateau for the rest of the decade. That’s primarily due to a projection that the country will continue to rely heavily on fossil fuels as its total energy demand grows. But as we’ll see, this is also one of the key uncertainties around China’s transition.
The biggest source of emissions in China is the power sector. More than 60% of its electricity generation came from coal-fired power plants last year. At COP26 in Glasgow, China said it would “phase down coal consumption” beginning in 2026, but unlike the U.S., which hasn’t built a large coal plant in 10 years, China is growing its coal fleet. Last year, the country greenlit the construction of two new coal plants per week on average, according to Global Energy Monitor, and the trend continued into 2023.
China’s coal permitting spree is the result of rising anxieties among leadership over energy security in light of the COVID-19 pandemic, war in Ukraine, and now the Israel-Hamas war, Kevin Tu, a non-resident fellow at Columbia’s Center on Global Energy Policy, told me. He said China “undoubtedly” overemphasized security in its energy decision-making and that these plants were at risk of becoming stranded assets.
But as Cornell University professor and Heatmap contributor Jeremy Wallace wrote earlier this year, China’s coal plants haven’t even been running at full capacity, and are “shifting to a role of backing-up renewables.” The International Energy Agency predicted last month that China will “gradually use its coal-fired power more to provide flexibility and less to deliver bulk energy.”
China may also begin trying to capture the carbon emitted from its coal plants, with the help of the U.S. One of the points of agreement reached this week was an aim to “advance at least 5 large-scale cooperative [carbon capture, utilization, and storage] projects each by 2030.”
Even though China is building coal plants like there’s no tomorrow, the proportion of its overall energy consumption coming from fossil fuels is actually dropping quite rapidly — at a much faster rate than in the U.S. The country has reduced fossil fuels to about 82% of its energy mix, and plans to get no more than 75% of its energy from fossil fuels by 2030.
The analysis by Climate Action Tracker shows China “significantly overachieving” that goal, primarily because the country is building wind and solar farms at a truly wild pace.
China will build more solar generation this year than the U.S. has built, period. The country’s 2023 additions of low-carbon resources — solar, wind, nuclear, and hydroelectric — are enough to meet the annual electricity needs of the entire United Kingdom.
Critics of China’s climate commitments look at the country’s unbelievably fast progress on renewables and argue it could easily raise its ambition. The country will most certainly exceed the 1,200 gigawatts of wind and solar it has outlined in its current policy plans.
China is even doing what has become impossible in much of the Western world and growing its nuclear fleet. “This will be the largest expansion of nuclear capacity in history, by far,” Jacopo Buongiorno, a professor of nuclear science and engineering at MIT, told CNBC recently.
China has already won the race when it comes to manufacturing clean technologies. Even though the U.S. is pouring billions of dollars into building up its own manufacturing capacity, it’s hard to imagine we’ll ever put a real dent in China’s market dominance for lithium-ion battery and solar module production.
It’s much more likely that the U.S. and other developed countries will continue to rely heavily on China for their own energy transitions. Earlier this year, Group of Seven leaders admitted as much when they described their approach to relations with China as “derisking, not decoupling.”
China’s manufacturing prowess could also benefit a far wider swath of the globe. “China has an opportunity to leverage such capabilities to facilitate deploying clean energy globally,” said Gang He, an assistant professor of energy and climate policy at Baruch College, in an email. “Especially in the world's least developed and most vulnerable countries.”
That’s not happening yet. In September 2021, China committed to ending its overseas financing of coal-fired power plants and to support renewable energy development abroad. But while its coal finance came to an abrupt halt, its investment in wind and solar has not gone up accordingly, according to the World Resources Institute.
But in the new joint statement with the U.S., China agreed to “pursue efforts to triple renewable energy capacity globally by 2030” in addition to accelerating the “substitution” of renewables for fossil fuels in their own countries.
How to make sense of all of this?
Earlier this week, CarbonBrief had quite an optimistic take on the data. It found that China’s rate of low-carbon energy expansion is on track to outpace the annual increase in electricity demand — telling a different story than Climate Action Tracker projected about that first key uncertainty I mentioned. This could push emissions “into an extended period of structural decline,” the authors wrote. But it all depends on whether wind and solar interests can overcome China’s powerful coal lobby.
“What China really needs is to conduct some serious institutional reform to make its power system more friendly toward renewables,” Tu told me. “The problem in China is that the coal interest group makes such reform very difficult.”
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Even as Iran retaliated against U.S. airstrikes, prices have stayed calm.
Oil prices have stayed stable so far following the U.S. strikes on Iranian nuclear facilities over the weekend, and President Donald Trump wants to keep it that way.
In two consecutive posts on Truth Social Monday morning, the president wrote “To The Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!” and “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!”
While Iran, of course, does not yet have an actual nuclear weapon, it does have a kind of “nuclear option” to retaliate: closing off the Strait of Hormuz, which separates the oil-rich countries like Qatar, Bahrain, Kuwait, and Iraq (and Iran’s own largest ports) from the Indian Ocean, and by extension all of global shipping. Iran’s parliament approved closing off the strait, but any real effort to do so would have to come from Iran’s most senior leadership, which has not so far seemed inclined to torpedo its own economy.
Markets, at least so far, do not see much more risk today than they did before the U.S. airstrikes. West Texas Intermediate oil price benchmark sat at just over $74 a barrel Monday morning, up substantially from its low of just over $57 in early May, but up only mildly from its $68 a barrel level on June 12, the day before Israel began bombing Iran. Prices are basically flat since Friday, even after Iran said it had launched a strike on an American base in Qatar.
“Multiple oil tankers crossing the Strait of Hormuz this morning, both in and outbound,” Bloomberg’s Javier Blas wrote on X Monday morning. “No[t] even a hint of disruption. Oil loading across multiple ports in the Persian Gulf appears normal. If anything, export rates over the last week are higher than earlier in June.”
As Greg Brew, an analyst at the Eurasia Group, told me, “The Hormuz risk is generally overstated. The Iranian threats are mostly rhetoric and meant for domestic political consumption. Hardliners in particular will use threats to close the strait as a means of letting off steam following the U.S. bombing of Fordow.”
“In reality,” he went on, “Iran faces a massive disparity in forces in the Gulf. A move to close Hormuz would be near suicidal as it would expand the scope of the war, drag in the Gulf states as well as the U.S., and imperil Iran’'s own energy exports at a time when the regime will need every financial and economic lifeline it can get.”
Inasmuch as oil prices have moved in the past few weeks, it’s been in response to the perceived increased risk of some kind of cataclysm to the world oil trade — even if the actual chances of the strait being entirely closed to tanker traffic remains low.
“Prices remain elevated on account of the regional risk, and are likely to remain in the $70s or low $80s until we see a pathway toward broader de-escalation,” Brew said.
For the American oil industry, however, a more nervous market might be a more profitable one.
Aniket Shah, an analyst at Jefferies, wrote a note to clients over the weekend attributing the increase since May to “rising tensions around the Strait of Hormuz, which channels ~20% of global oil shipments.”
“While the US imports less Middle Eastern oil than in past decades, global price shocks still drive up domestic fuel and transport costs,” he wrote.
In the months running up to the recent oil price increase, American drillers were facing an unpleasant combination of tariffs, increased production overseas (encouraged by Trump), and low prices at home, which wrecked their capital planning. Some domestic oil and gas drillers like Matador in April and Diamondback in May told their investors they planned to decrease their planned capital expenditures; over the past two months, drillers have been slowly but steadily taking rigs offline, according to the widely watched Baker Hughes rig count.
Conflict in the Middle East could therefore provide some relief (at least for the oil and gas industry) at home. “U.S. producers are among the winners here,” Brew told me. “A few months of higher prices will offer a nice hedge for shale drillers and ease their plans to reduce expenditure and output for the year.”
But higher profits for oil drillers will not necessarily translate into increased production, as Trump has commanded. “Since this is all based on risk premium and does not reflect a change in fundamentals, shale drillers are likely to deliver the gains to shareholders rather than pumping the money back into production,” Brew explained. “An overall drop in U.S. onshore output in 2025 is probably still in the cards.”
In that scenario, oil company profits would rise while production would fall year-over-year. And that would likely mean an even more infuriated Trump, who has also recently reignited his campaign to push Federal Reserve Chair Jerome Powell to cut interest rates, citing several months of low inflation.
“Elevated oil prices risk stalling recent disinflation trends and complicates the Fed’s path to rate cuts,” Shah wrote.
Even if the strait remains open, if oil prices don’t fall, expect more Truths.
On record-breaking temperatures, oil prices, and Tesla Robotaxis
Current conditions: Wildfires are raging on the Greek island of Chios • Forecasters are monitoring a low-pressure system in the Atlantic that could become a tropical storm sometime today • Residents in eastern North Dakota are cleaning up after tornadoes ripped through the area over the weekend, killing at least three people.
A dangerous heat wave moves from the Midwest toward the East Coast this week, and is expected to challenge long-standing heat records. In many places, temperatures could hit 100 degrees Fahrenheit and feel even warmer when humidity is factored in. “High overnight temperatures will create a lack of overnight cooling, significantly increasing the danger,” according to the National Weather Service. Extreme heat warnings and advisories are in effect from Maine through the Carolinas, across the Ohio Valley and down into southern states like Mississippi and Louisiana. “It’s basically everywhere east of the Rockies,” National Weather Service meteorologist Mark Gehring told The Associated Press. “That is unusual, to have this massive area of high dew points and heat.”
AccuWeather
Regional grid operator PJM Interconnection, which covers 13 states, issued an energy emergency alert for today. The alert urges power transmission and generation owners to delay any planned maintenance so that no grid sources are out of commission as temperatures soar. A heat wave of this nature is rare this early in the summer. The last time temperatures hit 100 degrees in June in New York City, for example, was in 1995, according to AccuWeather. Heat waves are becoming more frequent and more intense as the climate warms. Here’s a look at how these events have changed over the past 60 years or so:
Oil markets are jittery this morning after Iran’s parliament endorsed a measure to block the Strait of Hormuz in response to U.S. strikes on Iranian nuclear facilities. About 20% of the world’s oil and liquified natural gas shipments travel through the shipping route, and as The Wall Street Journalexplains, the supplies “dictate prices paid by U.S. drivers and air travelers.” Oil prices rose to five-month highs this morning on the news. Tehran has long threatened to close the strait, but such a move is seen as unlikely because it would disrupt Iran’s own energy exports, which are its “sole global energy revenue stream,” one analyst told the Journal.
A handful of climate-related provisions in the GOP’s reconciliation bill are in limbo after the Senate parliamentarian advised that the policies violated the “Byrd Rule,” i.e. were deemed extraneous to budgetary matters, and thus were subject to a 60-vote threshold instead of the simple majority allowed for reconciliation. The provisions include:
The Senate Finance Committee is set to meet with the parliamentarian today.
In case you missed it: The Supreme Court on Friday gave the green light for fuel producers to challenge a Clean Air Act waiver issued by the EPA that lets California set tougher vehicle emissions standards than those at the federal level. A lower court rejected the lawsuit from Diamond Alternative Energy and other challengers last year, but as Justice Brett Kavanaugh wrote for the majority, California’s ambitious Zero-Emission Vehicle Program is hurting fuel producers, so they have standing to sue. The vote was 7 to 2, with Justices Sonia Sotomayor and Ketanji Brown Jackson dissenting.
As Heatmap’s Katie Brigham has explained, if the EPA waiver is eliminated, Tesla could take a big financial hit. That’s because the zero-emissions vehicle program lets automakers earn credits based on the number and type of ZEVs they produce, and since Tesla is a pure-play EV company, it has always generated more credits than it needs. “The sale of all regulatory credits combined earned the company a total of $595 million in the first quarter [of 2025] on a net income of just $409 million,” Brigham reported. “That is, they represented its entire margin of profitability. On the whole, credits represented 38% of Tesla’s net income last year.”
Tesla launched its Robotaxi service in Austin, Texas, over the weekend. A small number of rides were doled out to hand-picked influencers and retail investors, and a Tesla employee sat in the front passenger seat of each autonomous Model Y to monitor safety. The rollout was “uncharacteristically low-key,” Bloombergreported, but CEO Elon Musk said the company is being “super paranoid about safety.” San Francisco, Los Angeles, and San Antonio are rumored to be the next cities slated for Robotaxi service. “Tesla is still behind Waymo, by several years,” wrote Jameson Dow at Electrek. “But Waymo has also not been scaling particularly quickly, and certainly both are slower than a lot of techno-optimists would have liked. So we’ll have to see which tortoise wins this race.” The stakes are pretty high: Investment management firm ARK Invest projected that Robotaxis could bring in $951 billion for Tesla by 2029 and make up 90% of the company’s earnings.
A new report from energy think tank Ember concludes that in the world’s sunniest cities, it’s now possible (and economically viable) to get at least 90% of the way to constant solar electricity output for every hour of the day, 365 days a year.
A conversation with Mary King, a vice president handling venture strategy at Aligned Capital
Today’s conversation is with Mary King, a vice president handling venture strategy at Aligned Capital, which has invested in developers like Summit Ridge and Brightnight. I reached out to Mary as a part of the broader range of conversations I’ve had with industry professionals since it has become clear Republicans in Congress will be taking a chainsaw to the Inflation Reduction Act. I wanted to ask her about investment philosophies in this trying time and how the landscape for putting capital into renewable energy has shifted. But Mary’s quite open with her view: these technologies aren’t going anywhere.
The following conversation has been lightly edited and abridged for clarity.
How do you approach working in this field given all the macro uncertainties?
It’s a really fair question. One, macro uncertainties aside, when you look at the levelized cost of energy report Lazard releases it is clear that there are forms of clean energy that are by far the cheapest to deploy. There are all kinds of reasons to do decarbonizing projects that aren’t clean energy generation: storage, resiliency, energy efficiency – this is massively cost saving. Like, a lot of the methane industry [exists] because there’s value in not leaking methane. There’s all sorts of stuff you can do that you don’t need policy incentives for.
That said, the policy questions are unavoidable. You can’t really ignore them and I don’t want to say they don’t matter to the industry – they do. It’s just, my belief in this being an investable asset class and incredibly important from a humanity perspective is unwavering. That’s the perspective I’ve been taking. This maybe isn’t going to be the most fun market, investing in decarbonizing things, but the sense of purpose and the belief in the underlying drivers of the industry outweigh that.
With respect to clean energy development, and the investment class working in development, how have things changed since January and the introduction of these bills that would pare back the IRA?
Both investors and companies are worried. There’s a lot more political and policy engagement. We’re seeing a lot of firms and organizations getting involved. I think companies are really trying to find ways to structure around the incentives. Companies and developers, I think everybody is trying to – for lack of a better term – future-proof themselves against the worst eventuality.
One of the things I’ve been personally thinking about is that the way developers generally make money is, you have a financier that’s going to buy a project from them, and the financier is going to have a certain investment rate of return, or IRR. So ITC [investment tax credit] or no ITC, that IRR is going to be the same. And the developer captures the difference.
My guess – and I’m not incredibly confident yet – but I think the industry just focuses on being less ITC dependent. Finding the projects that are juicier regardless of the ITC.
The other thing is that as drafts come out for what we’re expecting to see, it’s gone from bad to terrible to a little bit better. We’ll see what else happens as we see other iterations.
How are you evaluating companies and projects differently today, compared to how you were maybe before it was clear the IRA would be targeted?
Let’s say that we’re looking at a project developer and they have a series of projects. Right now we’re thinking about a few things. First, what assets are these? It’s not all ITC and PTC. A lot of it is other credits. Going through and asking, how at risk are these credits? And then, once we know how at risk those credits are we apply it at a project level.
This also raises a question of whether you’re going to be able to find as many projects. Is there going to be as much demand if you’re not able to get to an IRR? Is the industry going to pay that?
What gives you optimism in this moment?
I’ll just look at the levelized cost of energy and looking at the unsubsidized tables say these are the projects that make sense and will still get built. Utility-scale solar? Really attractive. Some of these next-gen geothermal projects, I think those are going to be cost effective.
The other thing is that the cost of battery storage is just declining so rapidly and it’s continuing to decline. We are as a country expected to compare the current price of these technologies in perpetuity to the current price of oil and gas, which is challenging and where the technologies have not changed materially. So we’re not going to see the cost decline we’re going to see in renewables.