Analysts are scrambling to grasp the numerous direct and indirect consequences of the global effects of the Iran war. One critical, but so far unrecognised consequence, is on China’s green transition. A simple logic is at play. For energy security reasons, China has reason to substitute oil and gas with coal in the near term, thus increasing emissions. But as renewables are cheaper, and global demand for them is greater with volatile fossil fuel prices, the effect of the war is that China will increase support for clean technologies, speeding up a green transition in the medium and long term.
The Iran war elevates energy security from an issue of high to critical concern for China. The main problem is access to oil and gas which, unlike coal, are scarce domestically. Two decades ago, China’s main worry was the Strait of Malacca, a bottle neck between the Indian Ocean and the South China Sea through which 60 per cent of the oil it imported had to pass. In 2003, President Hu Jintao declared that energy imports through the Malacca Strait were a vulnerability for China and that “certain major powers” (by which he meant America) were insistent on controlling the Strait.
He then stated that China needed to develop new strategies to mitigate this vulnerability. This situation became known as China’s “Malacca Dilemma“, can be traced in part to support for clean technologies in the early 2000s. This is most clearly seen in China’s Renewable Energy Law, signed in 2006 and then the role of clean tech in the Strategic Emerging Industries plan in 2010. The current volatility in oil and gas prices makes energy security an even more critical concern for China. Today, the Strait may be different, but the fundamental problem is the same.
China’s “Hormuz Dilemma”
The war in Iran, launched by America and Israel in late February 2026 and gradually coming to a halt in mid-June, led to the closure of the Strait of Hormuz, a narrow stretch of water between Iran and Oman through which much of the region’s exported oil must travel. The pause in exports pushed global oil prices up to more than $100 through bidding wars between importing countries. Even though China’s oil imports have fallen by 25 per cent as the country draws from its reserves, the higher prices of oil and gas incentivise China to use other energy sources.
While on the one hand the Iran war may push China towards coal in the short term, it will likely also cause China to double down on the expansion of clean technologies for growth. As well as for security, China has supported clean tech as a driver of growth, which has placed the country at a critical technology frontier, tapped into global export demand and reduced energy costs. The current fossil fuel price shock makes clean technologies relatively cheaper and increases global demand for them. For example, already before the war, expensive oil imports made Ethiopia indefinitely ban the import of fossil fuel cars, while in Pakistan a poorly designed and coal-based electricity system led to an explosion in rooftop solar.
China will increase support for clean tech to meet demand arising from this, now exacerbated, global trend of more competitive clean technologies. Over the last few years, Chinese companies have already spent over $200 billion in building clean tech manufacturing across the world.
Security and growth change China’s decarbonisation trajectory
Initially, with the increase in the use of dirtier coal, China’s progress with decarbonisation is likely to slow. But later it will speed up. In the near term, China’s emissions will likely be higher than had been anticipated, as coal is likely to replace parts of the current use of oil and gas. Increasing the share of electric vehicles entails greater energy demand, which in the near term can only be met with more coal alongside renewables. Furthermore, oil used for petrochemicals can be substituted with coal. China’s ongoing shift from coal to gas for heating can be halted and even reversed. And the 15 per cent of fertiliser made from predominantly imported gas can be made with coal instead. In this way, China may roll back and delay its intended shift away from coal by returning to more coal in the near term.
In the medium and long term, emissions will likely fall faster than expected before the war as coal is replaced by renewables. Clean energy – wind and solar – is already the cheapest energy source in China and is projected to continue falling. At that time horizon, China can electrify faster than current rates, and this will be driven by renewables, reducing coal consumption. Renewables already meet the entire annual increase in energy demand, and as the cheapest power source, this will cut into coal consumption. It will also cut into the coal used in the near term to replace oil and gas. Oil for cars and gas for heating will be replaced by renewable-powered electric vehicles and heat pumps. Furthermore, green hydrogen will have the ability to replace coal use in heavy industry, fertiliser and aviation fuel. This is already scaling up in China and beginning to expand globally. Like coal can replace many usages of gas and oil in the near term, renewables will replace all three fossil fuels in the longer term, and will do so faster as a necessity if the threat of higher oil and gas prices looms.
China’s new five-year plan, launched in March 2026, reflects such a change to the short and long-term decarbonisation trajectories. The plan reduces climate ambitions, which constitutes a buffer for increasing emissions in the near-term. At the same time the plan places a great emphasis on green hydrogen, which is the key to using renewables to decarbonise industry.
China was already supporting clean tech, but the Iran war makes these technologies an even higher priority. Even if the Hormuz Strait opens up soon, it would not change the effect of its closure. Energy security is simply an even greater priority in China today than before the Iran war. In fact, the higher the fossil fuel prices, the more China’s emissions might increase in the near term but decrease in the longer term.
This article was originally published on blogs.lse.ac.uk.
