U.S. and China just got serious about clean energy

Insights — January 2021

The world’s largest economies have signalled that they are finally getting serious about clean energy

During 2020, the world’s two largest economies sent the strongest signals yet about their intentions regarding clean energy:

  • China announced in a speech to the United Nations General Assembly that it intends to become ‘carbon neutral by 2060’ and stated that “humankind can no longer afford to ignore the repeated warnings of nature and go down the beaten path of extracting resources without investing in conservation, pursuing development at the expense of protection, and exploiting resources without restoration”. This was a marked change from previous rhetoric from China’s government which has at times appeared tone deaf to the issues around pollution, the environment and sustainability.
  • Joe Biden’s election as President was significant because it appears likely to be the catalyst for a step change in policy direction, government investment and support for clean energy. The President-elect made campaign promises to re-join the Paris Climate Agreement, work with Congress to enact net-zero emissions (carbon neutral) legislation and invest US$2 trillion during his first term (c.10x the investment in the Apollo space program in today’s dollars) to set the world’s largest economy and second largest emitter on an ‘irreversible course’ to achieve net-zero emissions by no later than 2050. More recently, the Democrats claiming the two undecided Senate seats in Georgia will lower the barriers to President-elect Biden’s policies being implemented.

We believe these signals will drive prolific legislative and regulatory tailwinds for clean energy in the economies which are the economic engine room of the world. Coupled with synchronised efforts by governments to increase economic activity following the COVID-19 crisis by investing in infrastructure. Further, recent trade tensions between these two economies have the potential to be the catalyst for an ‘arms race’ in industries from solar panels to electric vehicles which we anticipate would add material additional support.