Global climate tech surge faces geopolitical and infrastructural hurdles amid China's dominance

Climate technology investment is surging globally amid a complex and fractured policy environment, creating significant challenges for industrial decarbonisation strategies. Generation’s 2025 Sustainability Trends Report captures a year marked by rapid innovation and shifting political landscapes, warning that policy retrenchments, especially in the United States, are constraining clean energy progress just as global demand and technological advances accelerate.

The report notes a striking paradox: despite growing climate ambitions worldwide, political reversals have halted or rolled back key initiatives, most notably the U.S. federal government’s withdrawal from the Paris Agreement and the rollback of greenhouse-gas regulations. This retrenchment has had tangible financial consequences. Generation estimates that nearly US$30 billion of potential U.S. clean-energy investments have been scrapped, with long-term losses potentially reaching US$500 billion over the next decade. The resulting policy uncertainty is increasingly cited by industry analysts and international energy agencies as a critical obstacle to expanding renewable manufacturing capacity in North America.

Meanwhile, China has solidified its position as the epicentre of clean-energy manufacturing, supported by substantial industrial incentives, large-scale market deployment, and fast-growing export volumes. Recent data from Carbon Brief reveals that China’s clean-energy investments reached approximately $940 billion in 2024, nearing the $1.12 trillion spent on fossil fuels globally. Despite recent signs of investment growth slowing due to overcapacity and deflationary pricing pressures, China’s clean-tech sector already constitutes around 10% of its GDP. Its dominance extends across solar photovoltaics (PV), batteries, electric vehicles (EVs), and critical component materials, with Chinese companies producing more than enough lithium-ion batteries and solar panels to meet or exceed global demand.

This deep integration gives China an effective near-monopoly in many clean-energy supply chains. The International Energy Agency reported that China controls over 80% of solar PV module manufacturing capacity worldwide and accounts for roughly 70% of global EV battery exports. Chinese firms also dominate the production of key battery materials, controlling nearly 90% of cathode active material capacity and over 97% of anode material capacity globally. These factors have led analysts to describe China’s clean-energy sector as evolving into an “electrostate” , a nation whose future economic and geopolitical power is entwined with electricity generation technology and exports.

However, this expanding dependence on Chinese supply chains comes amid intensifying geopolitical risks and trade tensions. In response, China is recalibrating its subsidy policies after a significant boom in solar and wind installations in 2024, where solar capacity rose by 45% to 887 gigawatts. China’s National Development and Reform Commission announced in early 2025 that subsidies for new renewable projects completed after mid-2025 would be replaced by market-based pricing mechanisms, reflecting efforts to temper overcapacity and falling prices in the sector, although residential energy prices were expected to remain stable.

Europe is beginning to respond to this geopolitical landscape by attempting to develop local manufacturing capacity, albeit while relying heavily on Chinese technology and expertise. For instance, in November 2025, China’s CATL began building Spain’s largest battery factory, a €4.1 billion joint venture with Stellantis, supported by over €300 million in EU funding. The facility aims to bring Chinese expertise and workers to Spain to help bridge the knowledge gap while eventually training local talent. This scenario reflects Europe’s dual challenge of fostering indigenous clean-tech ecosystems while acknowledging China’s entrenched technological leadership.

Beyond manufacturing and investment trends, the global energy system is under strain from rapidly expanding electricity demand, driven by growing EV adoption, increased data centre operations, and rising cooling needs due to climate change. Despite renewable generation growth, solar expanded by 28.3% in 2024 and batteries now supplying up to 30% of peak evening demand in some Australian regions, total power demand is accelerating at nearly 4% annually, double the long-term rate. This demand surge has allowed fossil fuel generation to increase in absolute terms, frustrating efforts to reduce electricity-related emissions.

Transport electrification follows an uneven trajectory, with electric cars forecasted to constitute about 25% of global auto sales in 2025, led by China at over 50% and Europe nearing 25%. The United States is expected to see a temporary sales boost due to buyers rushing to capitalise on expiring federal incentives. However, electrification of heavy-duty transport, while gaining momentum, remains limited by nascent charging infrastructure.

An often-overlooked factor shaping clean-energy supply chains is grid connection delays. In major markets across the U.S., Europe, and Asia, lengthy waiting periods stretching from several years to nearly a decade for new grid hookups have become commonplace. This bottleneck is likely to be a decisive factor in regional sourcing and facility investment decisions. Companies that integrate infrastructure readiness and electrification timelines into their strategic planning are expected to secure greater cost stability and operational resilience amid these constraints.

For industrial decarbonisation professionals, the evolving clean-energy landscape underscores the need for nuanced supply chain strategies that balance political, economic, and infrastructural realities. While climate tech innovation and deployment surge ahead, the uneven policy support, geopolitical sensitivities, and infrastructural challenges suggest that success in the coming decade will depend not just on technology availability and cost competitiveness, but also on securing dependable policy frameworks and robust grid infrastructure. Integrating these considerations will be essential to advancing credible, scalable decarbonisation efforts across industrial sectors.