Three key policy areas in urgent need of improvement for advancing China's energy transition

What is it about?

China has achieved major progress in renewable energy over the past two decades, with supportive policies driving down costs and rapidly expanding wind and solar power. Renewables now make up over 40% of China’s total power capacity. However, as the industry moves beyond subsidies into a market-based phase, new challenges are emerging. This article highlights three key areas needing urgent policy improvement. First, clean electricity consumption must be strengthened. While production has surged, many users still lack clear obligations or incentives to use green power, leading to weak demand. Second, although generating renewable energy is now cheaper than fossil fuels, the overall cost to end-users remains high due to additional system costs like grid upgrades and backup capacity. These costs are not yet fairly or transparently shared. Third, China’s electricity and carbon markets remain largely disconnected, meaning users of clean power don’t fully benefit from its carbon-reduction value. Better coordination—such as linking green power use to carbon credits—could boost demand and reflect the true environmental value of renewables. By addressing these issues, China can build a more efficient and sustainable energy system that supports its climate goals and long-term economic growth.

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Photo by Zbynek Burival on Unsplash

Photo by Zbynek Burival on Unsplash

Why is it important?

This study highlights critical policy gaps emerging as China’s renewable energy sector moves beyond subsidies into a market-driven phase. Unlike earlier work focused on expanding supply, it shifts attention to new structural challenges that could hinder continued progress. The research is timely and offers a fresh perspective on how to sustain high-quality growth in the next stage of China’s energy transition.

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