A tale of two huge greenhouse gas emitters

The passing of America’s One Big Beautiful Bill (BBB) was no exception. 

Given concerns over the distributional effects of this legislation in the US, the world is keenly watching for the political fallout of hard-right approaches as also societal responses to the country’s pullback from clean energy in favour of conventional fossil fuels at the cost of climate action. 

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Dilutions of the Bill’s provisions for it to pass the US Senate signal that even with the majority enjoyed by the Republican Party in both Houses of Congress, rolling back the country’s energy transformation is not easy. 

For example, wind and solar projects would continue to be eligible for tax credits as long as they begin construction by June 2026 or are put into service by the end of 2027. Provisions on sourcing from “Foreign entities of Concern,” the focus of which is mostly on China, were also diluted. While federal subsidies for electric vehicles (EVs) are to be phased out by end-September, incentives for charging infrastructure will continue till June 2026. And, significantly, the budget for building strategic petroleum reserves has been slashed. 

The Inflation Reduction Act (IRA) of the Joe Biden era had shown the many positive outcomes of incentivizing an energy pathway that would have greatly facilitated a sustainable future for the US. Within two years, the IRA stood out for estimates of job creation in America’s clean energy sector (about 330,000), its effectiveness in mobilizing capital for clean energy initiatives and accelerating the transition to a low-carbon economy ($281 billion), and also its lowering of energy costs. 

These demonstrated benefits, along with the fact that Republican states benefitted the most from the IRA, would also have helped in the small but significant dilution of the BBB as originally proposed.

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In addition to the rollback of incentives for renewable energy, the BBB also seeks to boost onshore and offshore drilling, weaken fuel-economy regulations and delay a methane emission fee—all of which push America further back in the global race for a clean energy future. 

America’s nemesis China, on the other hand, is progressing at breakneck speed in developing its portfolio of clean energy solutions. Despite its continued dependence on fossil energy, with 35 more years to meet its net-zero commitment and recover investments in fossil fuel-based infrastructure, China is positioning itself very well for an alternate energy future. 

Its clean-energy push has led to emissions falling for the first time, holding promise for China to meet its peak emissions goal before 2030. The country leads in global investment too. In 2022, it invested an estimated $546 billion in renewable energy projects, including solar and wind power, battery technology, large-scale energy storage and EV production. This figure represents nearly half the world’s entire expenditure on low-carbon initiatives. It accounted for nearly 70% of global rare earth mineral production in 2023 and 80% of the solar panels manufactured. 

Its installed hydrolyser capacity for hydrogen production is nearly as large as the rest of the world’s put together, and it is betting big on hydrogen. It recently announced a comprehensive plan for its hydrogen supply chain with a key focus on large-scale green hydrogen production facilities (aiming for 100MW or a production rate exceeding 20,000 normal cubic metres of hydrogen per hour).

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The world’s two biggest carbon emitters seem to be taking polar opposite positions. One is focused on creating solutions and options for a sustainable future with a clear vision for a relatively painless transition, while the other appears desperate to hang on to legacy advantages that entail the risk of having to play costly catch-up in the not-too-distant future, even as future generations are saddled with a heavy debt burden. 

Also at risk will be productivity increases related to the use of artificial intelligence (AI), which is known to consume vast quantities of energy. Technologies related to information technology get adopted at nearly twice the speed of other technologies. But energy capacity additions in the US are likely to lag significantly behind the growth in electricity demand from a rapidly growing AI industry. This is particularly true when energy options are based on long gestation projects and prohibitive tariffs are imposed on imports of short-gestation, future-ready solutions.

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India has a decade more than China for meeting its net-zero goal. However, given its own vulnerabilities to the impact of climate change, the high risks of stranded assets associated with investments in coal-based power expansion and the opportunity cost of diverting limited financial resources to incentivize clean energy, it would be prudent to explore learning opportunities that can help accelerate its drive for carbon neutrality. 

While India has done well with some forms of renewable energy like solar and wind, and has a mission focus on EVs, hydrogen and bio-fuels, it will be useful to connect the dots over a timeframe of the next few decades to assess the full value that can be generated from this energy transition. 

In doing so, India also needs to recognize the leadership of China in various fields of clean energy and hedge its bets accordingly. 

The author is an independent expert on climate change and clean energy.