The new industrial era is coming, and the reshaping of the energy supply system and the reduction of industrial carbon are its core driving forces. China’s 14th Five-Year Plan, the European Union’s Green Deal, the United States’ inflation reduction Act, India’s energy efficiency Act, and Japan’s green growth strategy all show that the world’s major economies are racing to lead the new industrial race now being driven by zero-carbon technologies.

The latest report by Brussels-based think tank Strategic Perspectives provides a comprehensive analysis of the drivers and performance of energy and industrial transformation in China, the European Union, the United States, India and Japan. The data show that China has advantages in many areas, and the EU and the United States are accelerating to make up for weaknesses. India and Japan are also still in the race, but are doing slightly less well. Despite its potential, Japan’s economy seems to have missed the key opportunities of the new industrial age.

China is the clear frontrunner in the zero-carbon technology race. Last year, China was the largest contributor to global investment in zero-carbon technologies, followed by the European Union and the United States, the report said. China alone will account for 55 per cent of new renewable energy capacity installed globally by 2023, and more than half of the world’s electric vehicles are on its roads. According to Bloomberg New Energy Finance statistics, in the first half of 2023, global renewable energy investment soared 22% to $358 billion, a record high for the same period. Among them, China’s renewable energy investment reached $177 billion, accounting for nearly half of the global investment, ranking as the world’s largest renewable energy investment market.

China has led the way in building solar and battery supply chains, with zero-carbon technology manufacturing creating millions of new jobs and new economic activity. China is also gaining market share in the wind energy and heat pump sectors, putting pressure on competitors in the European Union and the United States.

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In order to accelerate the energy transition, to deal with the US inflation reduction bill and other considerations, the EU is stepping up its own green industrial policy. In 2022, the EU green industry showed a strong momentum of development, wind and light power generation reached a record high of 22% of the total power generation, and investment in low-carbon energy transition technologies reached 180 billion US dollars. The EU is also the world’s second largest market for electric vehicles and plans to stop selling new fuel cars by 2035.

According to the report, the EU is the second largest contributor to global investment in zero-carbon technologies. Offshore wind investment in the EU in the first half of 2023 increased significantly, by $9.4 billion compared to the same period last year, but still fell short of optimal market activity. In February, the European Commission unveiled the Green Deal Industry Plan to improve the competitiveness of Europe’s net zero industries and accelerate the climate-neutral transition. Many analysts believe that too many conditions, compliance requirements and reporting rules may make the implementation of this policy tool face many obstacles.

Investment in the energy transition in the United States has been on the rise in recent years. Unlike the EU, the US inflation-reduction bill focuses on tax incentives to rapidly expand the net-zero-emission sector. According to Bloomberg New Energy Finance statistics, in the first half of 2023, the United States renewable energy investment ranked second in the world, with an investment of $25.5 billion. There is still a significant gap compared with China’s renewable energy market volume, but this is a record high in its history.

Japan, which is highly dependent on imports of natural gas, oil and coal, is the only economy among the developed countries covered by the report to see a decline in net zero investment, from $24.32 billion in 2020 to $17.65 billion in 2021. Despite Japan’s recent launch of a Green Innovation Fund, which is expected to provide a budget of 2 trillion yen over ten years to support research and development in its domestic industrial priority areas, the country’s net-zero transition to energy and industry is slowing as its government seeks to deploy a wide range of low-carbon technologies and is unable to focus on improving technological efficiency. In addition, Japan is the only G7 country that has not announced a coal phase-out.

In electric vehicles, Japan risks falling behind. According to the report, highly lock-in hybrid technology has weakened Japan’s ability to benefit from the rapid development of electric vehicles and prevented its automakers from participating in the global EV sales race.

India has big ambitions for its energy transition. The government pledged at the 26th UN Climate Summit to significantly increase the installed capacity of renewable energy to 600GW by 2032. At present, the share of wind and light power generation in India has doubled from 2017 to 9%. However, the International Energy Agency estimates that India’s energy transition will cost about $160 billion per year by 2030, three times the current level of investment, and there is a huge gap in the current R&D investment available for renewable energy. At the same time, India prefers to develop individual industries, and does not have a comprehensive, economically focused industrial plan that is sufficient to make it a prominent position in the global zero-carbon technology value chain.