Beijing is doubling down on greening its economy, and aims to hit two major climate goals: “carbon peaking”, where carbon dioxide emissions have reached a ceiling by 2030, and “carbon neutrality”, where net carbon dioxide emissions have been driven down to zero by 2060.

Yet, China’s green push sits uneasily with its energy realities: coal still provides about 51percent of its electricity as of mid‑2025, underpinning China’s difficulty in greening its energy system swiftly. Here are five major challenges that will shape China’s green transition as it moves into 2026.

1. Energy transmission and wastage

Imagine standing in western China (for instance in Tibet, Xinjiang and Qinghai), which produces a lot of solar and wind energy. On bright and windy days, these installations generate vast amounts of clean electricity. Yet much of that power goes to waste.

China’s grid can only handle a limited load, and when renewable generation peaks, it risk overloading the power network. So grid operators respond by telling energy producers to dial down output, which is a process called “curtailement”. The result is that electricity from the west often fails to reach eastern economic hubs, such as Beijing, Tianjin, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian and Guangdong, where demand is greatest.

China needs to invest heavily in the ways to transport and store excess energy. The State Grid Corporation of China claims that it will be spending 650 billion yuan (£69 billion) in 2025 to upgrade the power network, and perhaps much more in subsequent years.

The challenge here is sustaining these capital-intensive projects while the broader economy still grapples with the lasting effects of the 2021 property crisis.

2. Cutting coal without blackouts

Even as China vows to go green and be a world leader in environmental energy, it continues to expand its coal capacity, and has added enough new coal-fired power stations in 2024 to power the UK twice over per annum. This apparent contradiction stems from concerns over energy security.

Beijing is determined to avoid a repeat of the blackouts and power shortages of 2020–2022. Coal provides dependable, round‑the‑clock power that renewables cannot yet fully replace. Yet the steady expansion of coal capacity undercuts China’s climate pledges and highlights ongoing tensions between China’s president, Xi Jinping’s, dual carbon goals and the country’s pressing energy demands, which raises questions about how far political ambition can stretch against economic reality.

3. Taming overcapacity without hurting growth

China’s vast manufacturing strength, which was once an asset, is now posing a problem. The rapid expansion of solar, wind, and electric vehicle industries has created overcapacity across the clean‑tech sector. Factories are producing more panels, turbines, and batteries than the domestic market can absorb. This has created a cut-throat price war, where companies sell at below cost price, which erodes company profits.

Beijing must find a balance between restraining overproduction without choking growth in green industries. This balancing act is politically sensitive, as local governments depend on these industries to create jobs (7.4 million in 2023), and generate substantial revenue. It was estimated that in 2024 green industries contributed 13.6 trillion yuan to China’s economy or 10 percent of the country’s GDP.

4. Trade tensions from overcapacity

China’s surplus of clean tech such as cheap solar panels, electric vehicles (EVs), and batteries, have triggered trade tensions abroad. In 2023 and 2024, the European Union investigated allegations of Chinese subsidies being poured into EVs, wind turbines and solar panels. Tariffs of up to 35.3 percent were placed on Chinese EVs. However, tariffs on Chinese solar panels and wind turbines have not been imposed so far.

But, on January 1 2026 the EU’s Carbon Border Adjustment Mechanism (CBAM) comes into effect. The CBAM is a carbon tax that Europeans will pay if imported goods are made using high carbon emissions. While the tax does not explicitly target EVs and solar panels, it will cover carbon-intensive materials used in their production, such as steel and aluminium, which are made using coal-fired plants.

What this means is Chinese clean tech might lose its competitive edge in the European market as customers are driven away from its products. Industrial players might rely on exports to stay afloat given the highly competitive nature of China’s domestic green market, but the CBAM is likely to undermine China’s green industry.

5. Fulfilling green targets locally

Chinese local governments are formally responsible for putting Beijing’s climate policies into practice, but many are expected to implement these policies largely on their own. While provincial authorities typically have more fiscal resources and technical expertise, city-level governments within each province often don’t have the funds to do so, which makes it difficult to deliver on green initiatives in practice.

At the same time, even when local authority leaders are told to achieve climate‑related targets, their career advancement remains closely linked to conventional economic performance indicators such as GDP growth and investment.

All of this helps explain the continued enthusiasm for new coal‑fired power projects. They are framed not only as a fail‑safe in case renewables and grids cannot meet rising demand, but also as avenues for local employment, fixed‑asset investment and fiscal revenue.

China’s continued greening in 2026 will be challenged by all of these issues.

This article is republished from The Conversation under a Creative Commons license. Read the original article.