Transition under constraint: China’s energy strategy in an era of geopolitical risk

Can a country decarbonise while simultaneously expanding its overall energy capacity — and do so in an increasingly complex geopolitical environment?

This question lies at the heart of China’s climate and energy targets in the draft outline of the 15th Five-Year Plan (2026-2030). The figures suggest continuity: a commitment to increase the share of non-fossil fuels in total energy consumption to around 25% by 2030, alongside a 17% reduction in carbon emissions per unit of gross domestic product (GDP). China also plans to expand total energy production capacity — the equivalent of 5.8 billion tonnes of standard coal.

These targets reflect a strategy in which decarbonisation, economic growth and energy security are pursued simultaneously. As geopolitical risks — particularly in the Middle East — increasingly shape Beijing’s calculus, energy policy is not only a climate issue, but a question of national security and economic resilience.

China’s latest targets signal acceleration — but on carefully controlled terms.

The goal of raising non-fossil energy’s share to 25% by 2030 reflects rapid expansion already underway, supported by continued state backing for clean energy industries like electric vehicles (EV).

Momentum is clear. Last year, newly installed wind and solar capacity exceeded 430 gigawatts (GW) , a 22% year-on-year increase, pushing combined installed capacity to 1,840 GW, surpassing thermal power for the first time. Renewable electricity generation also reached approximately 4 trillion kilowatt-hours.

But this is not fully matched by near-term policy ambition. The absence of updated 2030 capacity targets — despite a 2035 goal of 3,600 GW — highlights a gap between capability and policy signalling.

This gap is even more evident in carbon intensity targets. The planned 17% reduction falls below both the previous 18% goal in the 14th Five-Year Plan (2021-2025) and the 23% target required to meet China’s 2030 pledge. Under current assumptions, emissions could still rise by 3-6% over the plan period. Crucially, no absolute cap on total emissions has been set, and methodological changes may make progress easier to report without equivalent real-world reductions.

These signals point to a “managed transition”. Coal remains central, with no target year for peaking oil and coal consumption, reflecting heightened energy security concerns. In 2025 alone, China commissioned 78 GW of new coal power capacity, with a further 291 GW in the pipeline — a legacy of the 2022-2023 permitting surge. Without policy intervention, this risks prolonging coal expansion and slowing the energy transition.

If the targets define China’s ambitions, energy security defines their limits. As the world’s largest crude oil importer, China imported a record 11.6 million barrels per day in 2025. Of that total, approximately 1.38 million barrels per day — around 12% — came from Iran, while 45-50% of total crude imports, and around one-third of its liquified natural gas (LNG), transit the Strait of Hormuz. This geographic concentration creates acute exposure to geopolitical disruption.

Tehran’s responses to US and Israeli airstrikes on Iran have severely disrupted maritime traffic through the Strait. Tanker flows have plummeted while Brent crude — the global benchmark — surged above US$100 per barrel — the highest level since 2022. 

In response, Chinese refiners have adjusted operations, with some bringing forward maintenance schedules. The National Development and Reform Commission ordered an immediate freeze on exports of gasoline, diesel and aviation fuel — applying to all cargoes not yet cleared customs — to prioritise domestic fuel supply. 

Yet Beijing has not been caught entirely unprepared. As of early March, China held approximately 1.39 billion barrels in storage — equivalent to around 120 days of net imports — reinforced by a January 2025 law integrating government and commercial stockpiles. Longer-term import diversification has added a further layer of insulation: in 2024, Russia became China’s largest crude oil supplier with discounted Russian oil and natural gas — purchased at below-market rates as a result of Western sanctions on Moscow — providing both cheap energy and a degree of strategic buffer against supply shocks from any single region.

These measures reflect a broader shift: rather than eliminating risk, China is seeking to manage and redistribute it. In this context, renewable energy addresses not only climate goals, but also long-term strategic autonomy and energy self-sufficiency. 

China’s approach exposes a central dilemma: how to decarbonise without destabilising growth or energy security.

The most immediate concern is the pace and credibility of the transition. The absence of an absolute emissions cap, combined with continued coal expansion, means total emissions could still rise — widening the gap between China’s domestic policy framework and its international commitments. China’s 2030 Paris Agreement pledge — to reduce carbon intensity (CO2 emissions per unit of GDP) by over 65% from 2005 levels — is now at risk of being missed.

China’s 2035 nationally determined contribution (NDC), submitted in November 2025, marks a meaningful step forward: for the first time, Beijing has committed to an absolute reduction in economy-wide greenhouse gas emissions — by 7-10% from peak levels. Nonetheless, current policies remain insufficient to drive reductions meaningfully beyond business-as-usual — and the target falls well short of what the Paris Agreement requires.

Bridging this gap will depend in part on whether domestic market mechanisms can be strengthened. The national carbon trading market offers one potential pathway. Its expansion last year to include steel, cement and electrolytic aluminium means that the market now covers over 60% of national emissions, with a roadmap toward total allowance control by 2030. 

Yet design limitations persist. Allowances (permits that allow companies to emit a set amount of carbon) remain tied to output intensity rather than absolute caps, and carbon prices remain low relative to international benchmarks, limiting the system’s ability to constrain total emissions. The market’s trajectory from intensity-linked instrument to genuine emissions ceiling will be a key test of China’s domestic climate architecture.

External pressure is beginning to sharpen these incentives. The European Union (EU)’s Carbon Border Adjustment Mechanism (CBAM), which entered full implementation in January and places a carbon price on certain imports into the EU, exposes Chinese exporters in steel, cement and aluminium to direct financial penalties for high carbon intensity — consequences that domestic policy has yet to replicate at comparable scale. 

A further complication is the interplay between clean technology leadership and trade tensions. China produces roughly 80% of global solar panels and dominates wind turbine and lithium batteries, making it key to the global energy transition. Clean technology has become a primary engine of economic growth, accounting for over one-third of GDP growth last year, with investment reaching 7.2 trillion RMB (approximately US$1 trillion). Clean energy’s share of total consumption rose to 30.4% in the same year, underscoring how deeply the transition has been absorbed into China’s economic model.

Amid Washington’s stepped-back international climate leadership and an ongoing — if temporarily paused — tariff dispute, Beijing has cast itself as a responsible supplier to the developing world while simultaneously diversifying export destinations toward emerging markets in Southeast Asia, Africa and Latin America. This shift has been accelerated by Western trade barriers that redirected flows toward the Global South. 

This export dominance generates geopolitical leverage, deepens technological dependencies in recipient countries and reinforces China’s role as the indispensable supplier of transition-critical hardware — even as some recipient nations have begun imposing their own import duties in response to concerns about domestic industrial displacement.

Although the US-China trade truce reached in October 2025 remains, structural decoupling pressures continue to build. Should Western import barriers harden further, they risk fragmenting the very supply chains on which the global energy transition depends. This dynamic presents a paradox that neither side has yet resolved: the geopolitical imperative to reduce dependence on Chinese supply chains pulls directly against the climate imperative to deploy clean technology as cheaply and quickly as possible.

China’s 15th Five-Year Plan marks not a retreat from climate ambition, but a recalibration under constraint. Beijing is advancing a layered transition in which energy security, economic growth and decarbonisation proceed in parallel, shaped by a volatile geopolitical environment it cannot fully control. The result is a strategy that may appear cautious or even contradictory. In an era of uncertainty, China is not choosing between security and climate — it is attempting to secure both.

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