China Can’t Decide If It Wants to Be the World’s First ‘Electrostate’

Five years ago, China’s longtime leader Xi Jinping shocked and delighted the world by declaring in a video presentation to the United Nations that his country would peak its carbon emissions this decade and achieve carbon neutrality by 2060. He tried to rekindle that magic late last month in another virtual address to the UN, announcing China’s updated pledge under the Paris Agreement.

This time, the reaction was far more tepid. Given the disastrous state of American climate policy under President Donald Trump, some observers declared — as the longtime expert Li Shuo did in The New York Times — that China is “the adult in the room on climate now.” Most others were disappointed, arguing that China had merely “played it safe” and pointing out the new pledge “falls well short” of what’s needed to hit the Paris Agreement’s targets.

Yet China’s dithering is more than just an environmental failure — it is a governing mistake. China’s weak climate pledge isn’t just bad news for the world; it shows an indecisive leadership that is undermining its country’s own competitiveness by sticking with dirty coal rather than transitioning rapidly to a cleaner future.

The new pledge — known in UN jargon as a nationally determined contribution, or NDC — reveals a disconnect between the government’s official position and the optimistic discourse that now surrounds China’s clean energy sector. China today is described as the world’s first electrostate; it stands at the vanguard of the solar and EV revolution, some say, ready to remake the world order against a coalition of petrostate dinosaurs.

The NDC makes it obvious that the Chinese government does not yet view itself in such a fashion. China might look like an adult, but it more closely resembles a gangly teenager who is still getting used to their body after a growth spurt. As the analyst Kingsmill Bond recently put it on Heatmap’s podcast Shift Key, Chinese clean tech manufacturers have unlocked a cleaner and cheaper path to economic development. It isn’t yet clear that China is brave enough to commit to it. If China is the adult in the room, in other words, we’re screwed.

The devil’s in the details

Let’s start by giving credit where due. For a country that had never offered an absolute emissions reduction target before, Xi’s promise — to cut emissions by 7% to 10% by 2035 — is a kind of progress. But observers expected China to go much further. Researchers at the University of Maryland and the Center for Research on Clean Air, for example, each suggested that emissions could decline by roughly 30% by that year. Only a reduction of this magnitude would actually keep the planet on a trajectory sufficiently close to the Paris Agreement’s goal to limit warming to 2 degrees Celsius.

Many inside China’s policy apparatus considered such ambitious cuts to be infeasible; for instance, Teng Fei, deputy director of Tsinghua University’s Institute of Energy, Environment and Economy, described a 30% reduction as “extreme.” Conversations with knowledgeable insiders, however, suggested a headline reduction of up to 15% was viewed as plausible. In that light, the decision to commit a mere 7% to 10% can only be seen as disappointing.

The NDC obviously represents a floor and not a ceiling, and China has historically only made climate promises that it knows it will keep. But even then, China’s leadership has given itself tremendous wiggle room. This can be seen in part by what is not in Xi’s pledge: any firm commitment about when, exactly, China’s emissions will peak. (His previous pledge only said that it would happen in the 2020s.) While it’s quite possible that 2024 or 2025 will end up being the peak, as some expect, the new pledge creates a perverse incentive to delay and pollute more now. The speech also contained little on non-CO2 greenhouse gases such as methane and nitrous oxide — which, given China’s previous commitment to reach net zero on all warming gases by 2060, seems like a significant blind spot.

Other commitments are only impressive until you scratch the surface. Xi pledged that China would install 3,600 gigawatts of solar and wind capacity by 2035. That may sound daunting: The United States, the world’s No. 2 country for renewables capacity, has a combined 400 gigawatts of solar and wind. But China already has about 1,600 gigawatts installed. So China’s promise, in essence, is to add around 200 gigawatts of solar and wind each year until 2035 — and while that would be a huge number for any other country, it actually represents a significant slowdown for China. The country added 360 gigawatts of wind and solar combined last year, and has already installed more than 200 gigawatts of solar alone in the first eight months of this one. In this light, China’s renewables pledge seems ominous.

More distressingly for climate action, it is unclear if this comparatively slower pace of clean electricity addition will actually allow China’s electricity sector to decarbonize. As the electricity analyst David Fishman has noted, China’s overall electricity demand grew faster than its clean electricity generation last year, leaving a roughly 100 terawatt-hour gap — despite all that new solar and wind (and despite 16 gigawatts of new nuclear and hydroelectric power plants, too). Coal filled this gap. Last year, China began construction of almost 100 gigawatts of new coal plants even though its existing coal fleet already operates less than half of the time. These new plants represented more than 90% of the world’s new coal capacity in 2024.

China’s climate strategy — like every other country’s — requires electrifying large swaths of its economy. If new renewables diminish to only 200 gigawatts a year, then it seems implausible that its renewable additions could meet demand growth — let alone eat away substantial amounts of coal-fired generation — unless its economic growth significantly slows.

Slow-walking, not sprinting

Yet the news gets worse. Taken alone, the NDC’s weakness may speak of mere caution on China’s part, yet a number of policy changes to China’s electricity markets and industrial policy over the past year suggest its government is now slow-walking the energy transition.

In 2024, for instance, China started making capacity payments to coal-fired power plants. These payments were ostensibly designed to lubricate a plant’s economics as it shifted from 24/7 operation to a supporting role backing up wind and solar. Yet only coal plants — and not, for instance, batteries — were offered these funds, even though batteries can play a similar role more cheaply and China already makes them in scads. Even more striking, coal plants have been pocketing these funds without changing their behavior or even producing less electricity

At the same time, China’s central leadership has cut the revenues that new solar and wind farms receive from generating power. New solar and wind plants are now scheduled to receive less than the same benchmark price that coal receives — although the details of that discount vary by province and remain uncertain in most of them. Observers hope that this lower price, along with a more market-based dispatch scheme, will eventually allow renewables-heavy electricity systems to charge lower rates to consumers and displace more expensive coal power. However, there’s little clarity on if and when that will happen, and in the meantime, new renewables installations are plummeting as developers wait for more information to emerge.

Chinese industrial policy is exacerbating these trends. The world has long talked about Chinese overcapacity. Now even conversation in the Western media has progressed to discussing “involution” — a broader term that centers on the intensive competition that characterizes Chinese capitalism (and society). It suggests that Chinese firms are competing themselves out of business.

The market-leader BYD, for instance, has become synonymous with the Chinese battery-powered auto renaissance, but there are fears that even this seeming titan might have corrupted itself on the way. The company has larded an incredible amount of debt onto its books to fuel its race to the top of the sales charts; now, murmurs abound that the firm might be “the Evergrande of EVs” — a reference to the housing developer that collapsed into bankruptcy earlier this decade with hundreds of billions of dollars in debt. In recent months, BYD’s engine seems to be sputtering, with sales dropping in September 2025 compared with last year.

As such, the government has come in to try to negotiate new terms of competition so that firms do not end up doing irreparable harm to themselves and their future prospects. It is doing so in other sectors as well: In solar, it has tried to create a cartel of polysilicon manufacturers, a solar OPEC of sorts, to make sure that the pricing of that key input to the photovoltaic supply chain is at a level where the producers can survive.

This may all seem positive — and there is certainly an argument that the government could play a role in helping these new sectors negotiate the difficult waters that they find themselves in. But I interpret these efforts as further slow-walking of the energy transition. A slight reframing can help to understand why.

What is literally happening in these meetings? The government is bringing private actors into the same room to bang their heads together and deal with the reality that the current economic system is not working, largely because of intense competition — a problem likely best solved by forcing some of the firms and production capacity to shrink. Firms are unprofitable because exuberant supply has zoomed past current demand, and the country’s markets and politics are not prepared to navigate the potentially needed bankruptcies or their fallout. So the government is intervening, designing actions to generate the outcomes it desires.

Yet there is something contradictory about the government’s approach. A decarbonized world, after all, will be a world without significant numbers of internal combustion vehicles, so traditional automakers will eventually need to shut down or shift into EVs — yet their executives aren’t being dragged in for the same scolding. Likewise, a decarbonized world will be a world without as many coal mines and coal-fired power plants. Firms in the power sector should be scolded for continuing coal production at scale.

These are problems of the mid-transition, as the scholars Emily Grubert and Sara Hastings-Simon have described decarbonization’s current era. But China is further along in this transition than other states, and it could lead in the management and planning required for the transition as well.

The middle-income trap

China is stuck. For four decades, China’s growth rested on moving abundant cheap labor from low-productivity agriculture to higher productivity sectors, often in urban areas. The physical construction of China’s cities underpinned this development and became its own distorting bubble, launching a cycle of real-estate speculation. The government pricked this bubble in 2020, but since then, Chinese macroeconomic strength has failed to return.

Despite the glimmering nature of its most modern cities, China remains decidedly middle income, with a GDP per capita equivalent to Serbia. Many countries that have grown out of poverty have reached this middle income territory — but then become mired there rather than continuing to develop. This pattern, described as “the middle income trap,” has worried Chinese policymakers for years.

The country is obviously hoping that its new clean industries can offer a substitute motor to power China out of its middle-income status. Its leadership’s apparent decision to slow walk the energy transition, however, looks like a classic example of this “trap.” The leadership seems unwilling to jettison older industries in favor of the higher-value added industries of the future. The fact that the government has previously subsidized these industries just shows the complexity of the political economy challenges facing the regime.

The NDC’s announcement could be seen as an easy win given Trump’s climate backwardness. Clearly that’s what Xi was counting on. But China is too important to be understood only in contrast to the United States — and we should not applaud something that not only fails to recognize global climate targets, but also underplays China’s own development strategy. The country is nearing the release of its next five-year plan. Perhaps that document will incorporate more ambitious targets for the energy transition and decarbonization.

This summer, I visited Ordos in Inner Mongolia, a coal mining region that is now also home to some of China’s huge renewable energy megabases and a zero-carbon industrial park. Tens of thousands still labor in Ordos’ mines and coal-hungry factories, yet they seem like a relic of an earlier age when compared to the scale and precision of the new green industrial facilities. The dirty coal mines may still have history and profits on their side, but it is clear that the future will see their decline and replacement with green technology. I hope that Xi Jinping and the rest of the Chinese political elite come to the same conclusion, and fast.