China’s Climate Push Is An Economic Power Play

Record Number Of Chinese Investors Pushes Stocks New High

While climate policy in major industrialized democracies is increasingly treated as a culture war, China is treating it as an economic strategy. Beijing’s new pledge to cut greenhouse gas emissions 7–10% below its peak by 2035 looks modest against the demands of climate science. But focusing only on that number misses the real story. China is using climate action to lock in industrial dominance, secure critical resources, and design the financial plumbing of the global transition. Meanwhile, the U.S., U.K., and Europe are letting short-term politics inject volatility into climate action. Investors are already voting with their capital, and their confidence.

Modest Target, Bigger Ambition

Beijing’s climate play is less about the exact percentage of emissions reduction at home, and more about who controls the infrastructure, resources, and financial systems of the global transition. China is turning climate action into industrial advantage, financial leverage, and geopolitical influence.

China already produces more than 80% of the world’s solar panels, dominates global wind turbine manufacturing, and last year surpassed Japan as the leading exporter of electric vehicles. Its grip on the upstream resources underpinning these industries is equally formidable: refining over 70% of cobalt, 60% of lithium, and nearly 90% of rare earths. Any country seeking to build a low-carbon economy will either buy from China or pay a steep premium to avoid doing so. Generation Investment Management’s 2025 Sustainability Trends Report put it bluntly, “for the foreseeable future, the energy transition comes with a Made in China stamp.”

At the same time, by driving down costs through scale, China has accelerated clean-tech uptake in countries from Pakistan to Brazil to Indonesia. Generation IM’s analysis showed that clean technology deployment is now one of the strongest determinants of national competitiveness. Economies that embed decarbonization into their growth models are becoming magnets for investment; laggards are already seeing their cost of capital rise.

The Disclosure Dividend and Investor Logic

That same logic shows up in corporate finance. CDP’s latest Disclosure Dividend report found that companies with robust climate disclosure and transition planning enjoy a 12% lower cost of capital and are 15% more likely to attract long-term institutional investors. As the report notes, “disclosure reduces uncertainty, improves risk management, and signals resilience to markets.”

China’s state-directed approach has effectively internalized these lessons. On a recent Morgan Stanley webcast, portfolio strategists observed that capital markets are tilting toward firms deeply integrated into Chinese clean-tech supply chains because they offer predictability. Policy certainty translates directly into investor confidence. According to BloombergNEF, global investment in the transition hit $2.1 trillion in 2024, with renewables in the first half of 2025 alone reaching a record $386 billion. Much of that money is flowing toward firms tied to Chinese supply chains.

Carbon Markets as Geopolitical Leverage

That investor confidence may grow stronger as Beijing builds out the financial plumbing of the transition. In its 2025 Progress Report on the National Carbon Market, China confirmed plans to expand into cross-border carbon trading. Rich Gilmore, chief executive of Carbon Growth Partners, called this a turning point saying, “China sees the economic, political and environmental opportunity that U.S. backsliding presents, and sees carbon markets as a key way to capture that opportunity.”

If companies from industrialized democracies end up buying Chinese credits to meet their own compliance obligations, Beijing will not only dominate the hardware of the energy transition but also help govern its financial infrastructure.

Beijing is also signalling readiness to take on broader global responsibilities. At the WTO, China announced it would forego “special treatment” flexibilities normally granted to developing countries in future negotiations, seen as a move away from protectionism. It also joined Brazil, Norway, the U.K., and Germany in backing the $125 billion Tropical Forests Forever Facility, designed to reward countries for conserving forests. Together, these moves position China as a responsible power at the very moment others are retreating.

The Politics of Retreat

In the UK, Conservative leader Kemi Badenoch, seeking to head off pressure from Reform, has pledged to repeal the landmark 2008 Climate Change Act, which established binding carbon budgets and created the independent Climate Change Committee. Ed Matthew, UK programme director at think tank E3G, described the proposal as “a monstrous act of economic and environmental vandalism… anti-science, anti-growth, anti-health and anti-nature.”

Though not current policy, the rhetoric matters. It shows how climate action is being pulled into a culture-war contest for votes, rather than treated as an economic competitiveness issue. For investors, even opposition threats of repeal weaken confidence by raising doubts about long-term policy stability. The economics are not ambiguous: from Stern to the IMF and NGFS, the evidence shows the cost of inaction exceeds the cost of action, through higher risk premia, weaker growth, and rising physical-risk losses.

The U.S. At Risk Of Dismantling Its Climate Foundation

In Washington, the threat runs even deeper. The administration has moved to undermine the 2009 Endangerment Finding, the scientific and legal foundation that allows the Environmental Protection Agency to regulate greenhouse gases under the Clean Air Act. Without it, rules on vehicles, power plants, and industry lose their legal anchor. Analysts warn that rescinding the finding amounts to foundational deconstruction of U.S. climate policy.

This undermines a booming sector: U.S. clean-energy jobs grew three times faster than the overall workforce in 2024, adding ~100,000 jobs and reaching more than 3.5 million in total, with 82% of new energy jobs in clean tech. Undoing the legal foundation could threaten one of America’s strongest job engines.

Former Vice President Al Gore, chair of Generation IM, put it bluntly at the launch of the report – that walking away from climate action “is irresponsible, nothing short of a tragedy.” He argues that abandoning the transition “at a time when low-emissions technologies are being commercialised everywhere else” will cost the U.S. competitiveness. For investors, the consequence is simple: higher policy volatility translates into higher risk premia.

Europe’s Strategic Drift

At the European level, climate has become a coordinated wedge issue. The 2024 European Parliament elections strengthened far-right blocs and pushed the centre-right toward diluting elements of the Green Deal, reframing climate rules as sovereignty or competitiveness threats and amplifying cost-of-living and farmer-protest narratives. Analysts now track a continent-wide backlash playing out in committees and party platforms. Even the Commission has warned that climate disinformation is undermining support for action.

The result is slower, more volatile law-making — the kind of regulatory instability that unsettles investors. At the very moment predictable frameworks are becoming a competitive asset, Europe risks signalling drift. That contrast only sharpens China’s advantage, where Beijing offers scale and direction, Europe risks eroding credibility.

Emerging Economies Seize Opportunity

Other emerging economies are waking up to the opportunities. At the 2025 Africa Climate Summit, leaders recognised the opportunities in the low carbon transition and declared they were not victims but solution providers, positioning the continent as a potential renewable hub.

In India, the government has begun pushing to decarbonize the iron and steel sector, one of the world’s most emissions-intensive industries, driven as much by resource and pollution pressures as by diplomacy. Both regions see land, food, and energy as interlocking competitiveness challenges.

The moral case is getting louder, too. In October 2025 Pope Leo called for a ‘true ecological conversion’ and urged citizens to press governments for stronger action and highlighting concrete steps like a Vatican solar program and cross-faith climate work. The Pontifical Academies also warned that delay raises systemic risks (economic, social, and health related) echoing the investor logic that policy certainty lowers risk premia.

The High Cost Of Delay

Meanwhile, the economic rationale for resilience only grows stronger. A joint report from Boston Consulting Group and the World Economic Forum estimated that climate-linked health risks could drive $12.5 trillion in losses by 2050, with productivity losses exceeding $1.5 trillion in sectors such as agriculture and construction. Chinese planners have already framed clean energy, pollution control, and adaptation as workforce protection measures, as insurance for growth and social stability.

Delaying action is not neutral. The IMF shows that climate shocks and stop-go policy depress long-run growth and raise risk premia, a drag that compounds over time. Swiss Re warns that in severe late/no-action scenarios, global GDP could be up to 18% smaller by mid-century. NGFS scenarios show that “disorderly” transitions (where policies are delayed or divergent) are likely to force sharper, costlier adjustments than early, orderly pathways.

The price is already being paid. Globally the WEF reports trillions in damages incurred already, and a recent European Environment Agency report said average annual weather-damage losses more than doubled to €44.5 billion in 2020–2023, with cumulative EU losses in the hundreds of billions.

Scale Beats Rhetoric

The U.S. is attempting to undermine the legal foundation for climate action, the U.K.’s opposition is threatening to repeal its own climate bedrock, and Europe is experiencing regulatory uncertainty. Yet the economic cost of delay is already clear, from higher risk premia to trillions in climate-linked losses.

The real issue is not about who sets the most ambitious targets. It is about who builds the infrastructure, secures the resources, and earns investor trust. On that front, scale beats rhetoric and right now, China has both. Unless others recommit, Beijing will not only dominate the hardware of decarbonization but also set the terms of the low-carbon economy.

Forbes