To help its clients plan for the long-term future, Strategic Business Insights (SBI) maintains a set of three scenarios that describe alternative future development pathways for global business, technology, and society. One of the three scenarios, Dragon's Rise, envisions a future in which China achieves exceptionally rapid progress in the transition to renewable energy thanks to a combination of highly effective governance, technology leadership, and manufacturing prowess. During the scenario period, China plays an increasingly dominant role in driving the world's progress toward a sustainable future, but also faces intensifying trade barriers that limit Western stakeholders' ability to benefit from Chinese clean-tech innovations such as low-cost electric vehicles (EVs). During 2023, several key developments moved the world closer to the future that Dragon's Rise envisions. Sections below summarize these developments and explore their potential long-term impacts.
- Breakthrough in Low-Carbon Energy Growth. According to a 2023 forecast from Carbon Brief, China's greenhouse-gas emissions will likely enter a period of structural decline from 2024 onward. Crucially, China's world-leading renewable-energy capacity growth is now outpacing its overall growth in energy demand, allowing the nation to make meaningful progress toward a sustainable energy system. Globally, renewable-energy growth has been unable to keep pace with overall increases in demand for energy, resulting in continued demand growth for fossil fuels.
- Low-Cost Energy Advantage. A 2023 report from Wood Mackenzie highlighted the substantial economic advantages that China is now reaping from its massive additions in renewable-energy capacity. Unlike other advanced economies, which have been suffering from energy-price volatility that has contributed to high inflation, China's renewable-energy sector has enabled relatively low and stable energy prices. Potentially, continuing renewable-energy growth in China could further its energy-cost advantages relative to other nations, creating compounding advantages for Chinese manufacturers and information-technology companies.
- Peak Gasoline. During 2023, Chinese oil refiner Sinopec projected that China's demand for gasoline would begin to decline after 2023—two years earlier than Sinopec previously anticipated. EV adoption in China has outpaced estimates in recent years, accelerating the arrival of peak gasoline demand in the country. Meanwhile, other advanced economies are struggling with slowing demand growth for EVs.
- EV Technology Leadership. Events during 2023 suggested that Chinese manufacturers have achieved global technology leadership in the EV industry. For example, Volkswagen and Stellantis reportedly forged agreements with Chinese EV automakers to gain access to their technology, reversing a longstanding trend in the auto industry. Other companies were reportedly also looking to make similar deals as of the end of 2023. Meanwhile, a report from Moody's Analytics predicted that China would become the world's largest auto exporter by the end of 2023, eclipsing Japan. China's growing strength in the global auto industry is occurring despite strong trade barriers that limit Chinese companies' access to many Western markets.
Despite China's major progress toward clean-tech dominance in 2023, the future that the Dragon's Rise scenario envisions is still far from assured. China faces severe challenges from forces such as its aging-population demographic, mounting debt, and loss of access to crucial AI technologies; accordingly, China's lead in clean tech could evaporate within the coming years instead of intensifying. Western governments, meanwhile, are increasing investment in clean-energy manufacturing and could potentially threaten China's leadership before 2030, assuming political support for clean energy continues to remain strong in nations like the United States. Many other factors could radically reshape clean energy's future. For example, clean-tech manufacturers from India have been taking advantage of improved relations with the United States to establish new manufacturing centers there; future changes to US-India relations could jeopardize—or accelerate—India's influence on global clean-tech markets.
To deal with future uncertainty effectively, SBI's Metaverse World and Green Realignment scenarios envision different alternative pathways for global clean-energy progress, including pathways in which China's influence diminishes. (SoC1334 — Global Scenarios 2035 provides a brief summary of the scenarios.) By considering alternative futures and planning for each of them, strategic decision makers become able to anticipate disruption and create future plans that can withstand uncertainty.