China still leads in renewables investment — but the gap is narrowing

Once again, China invested more in cleantech than any other major economy — far more. 

However, the gap between China and its competitors in the West is beginning to narrow, according to a new report from BloombergNEF, in part thanks to federal policy.

• The top line: China invested a whopping $676 billion in 2023, the report found. Combined, though, investments from the United States, European Union, and United Kingdom surpassed those of China for the first time in 2023, at $718 billion. 
• The nuts and bolts: The U.S. alone invested $303 billion last year — a 22% uptick since 2022, far higher than China’s 6% increase — driven largely by incentives provided by the Inflation Reduction Act. A strong year for European solar, spurred in part by Russia’s invasion of Ukraine, and electrified transport pushed the EU total above $400 billion. Consequently, China’s head-start is shrinking.

Overall energy transition investments increased by 17%, to reach $1.8 trillion. 

All regions globally hit investment records, with the most rapid growth seen in the Europe-Middle East-Africa region. 

However, reaching net zero by 2050 would require a nearly threefold increase from the present investment rate. Investments in clean supply still lag behind fossil fuel supply investment by 7% — or a $75 billion gap. The report cautions that annual spending in electrified transport, renewable energy, energy storage, and power grids must double over the next six years.

In 2023, spending on electrified transport eclipsed spending on renewable energy. Up 36% from 2022, the sector saw $634 billion in investments as EV adoption surged globally. 

Renewable energy investments, on the other hand, only rose 8%, to a total of $623 billion. Power grids also saw a significant increase and are expected to play a key role in achieving BNEF’s Net Zero Scenario. Emerging technologies also experienced substantial growth in 2023; green hydrogen alone tripled from 2022.

Meanwhile, supply chain investments reached record levels and are on track to achieve net zero by 2050, despite several years of setbacks from the pandemic and geopolitical turmoil. 

But equity financing is (still) dropping

Climate tech equity financing fell by a third in 2023, as high interest rates and companies going public discouraged investors for the second year running. 

Venture capital and private equity funding decreased by 13%. And reverse merger and IPO funding both tumbled by 69% and 65%, respectively. 

However, equity financing from secondary equity offerings jumped 27% in 2023 for already-public companies. The transportation and energy industries also fared well, raking in over 70% for the third year in a row.

Chinese companies received the most investment, largely because of their roles in EV manufacturing and clean energy hardware.