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Is the end nigh for clean-energy companies in the new era of cheap oil? Will China relax its embrace of renewable energy as prices fall? China is the world's biggest polluter. If it were to ramp up its carbon intensity, the consequences would be dire for the planet.

History suggests that clean energy and cheap oil are not compatible. After the 1973-74 Arab oil embargo, which saw oil prices quadruple, North America, Europe, Japan and other industrialized regions made energy conservation a priority. Cars became much smaller and great, gas-guzzling V8s gave way to four-cylinder engines. Solar panels were born and the White House installed them on the roof.

Then came the cheap oil era of the 1990s and burning vast quantities of oil was back in vogue. Sales of SUVs soared and fuel economy dropped back to levels not seen since the Ford Model-T era. Solar panels vanished. Of course, it all reversed again a decade later, when oil prices climbed relentlessly, peaking out at $147 (U.S.) a barrel in early 2008, just before the financial crash.

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Oil now trades at about $50 and clean-energy companies are once again under pressure. The shares of Tesla Motors, the American maker of all-electric cars, are down 28 per cent since their yearly high in September as analysts forecast lower sales (the shares are still up 39 per cent over a year). Vestas Wind Systems, the Danish maker of wind turbines, dropped off a cliff in the autumn, when oil prices were diving, but have since recovered somewhat for a six-month loss of 8 per cent. Solar companies have fared worse. China's Yingli Green Energy, one of the biggest makers of photovoltaic cells, has taken a thorough beating; its shares are down 33 per cent in six months and 70 per cent in a year.

But given the price collapse, the damage to the clean-energy companies could have been far worse and almost all of them have climbed off their lows even as oil continued to sink.

There is no doubt that cheap oil is not good for their business, but the wind turbine and solar panel markets are not driven by oil prices alone. Governments everywhere are subsidizing clean energy through tax breaks.

This week, the German think tank Agora Energiewende reported that almost 26 per cent of Germany's electricity came from renewable sources in 2014, up from 24 per cent in 2013. That makes renewable energy the biggest single source of power. With the prices for all hydrocarbons – oil, coal, natural gas – coming down, and as taxpayers get weary of subsidizing clean energy, it's unlikely that the German renewable energy industry can sustain its leading market share. But clean energy will not disappear. To abandon it would be to abandon any commitment to fighting climate change.

Still, some loss of momentum for the clean-energy companies is inevitable and, once they lose favour among bankers and investors, it could take years for them to get back in the game. The big worry is that China's remarkable drive to embrace renewable energy will now go into reverse. Certainly, the price collapse of companies such as Yingli does not bode well.

But before environmentalists and any country bent on curbing carbon output lose hope, consider that China doesn't so much see clean energy as the answer to global warming as it does as an energy security and job creation effort. By pumping out solar panels, wind vanes and batteries in vast – and ever cheaper – quantities, China in effect can "manufacture" its own energy policy. Far better to contain an energy policy on home turf than rely on endless oil imports from volatile parts of the world, such as Libya or Iraq or West Africa, where civil wars and revolutions can curtail or end oil shipments overnight.

John Mathews, management professor in Sydney at Macquarie University and author of the new book Greening of Capitalism: How Asia is Driving the Next Great Transformation, thinks Chinese investment in renewable energy will get stronger even as oil prices sink. "My take on the low oil prices is that they won't knock out renewables because, this time, China is investing heavily in them for their own reasons," he said in an e-mail. "These have to do with the necessity to have cleaner skies and water, and to enhance energy security – be less dependent on oil imports from unstable parts of the world. Neither of these rationales is negated by a low oil price."

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According to Mr. Mathews, the scale of China's clean-energy drive is stunning by Western standards. In an article he co-wrote in the autumn for the science journal Nature, he observed that, between 2008 and 2012, Chinese investment in wind, solar, hydroelectric and nuclear power increased 40 per cent to about 200 billion yuan ($32-billion U.S. at current exchange rates). Over the same period, the share of investment in fossil fuel power fell to about 25 per cent from 50 per cent. China's wind power capacity is up fivefold in the past four years and renewable energy capacity now exceeds that of nuclear plants. Zero-carbon sources now contribute almost 10 per cent of China's energy use, up from 5.6 per cent in 2000.

I suspect that China's clean-energy drive will slow down a bit if oil stays low. The Chinese are cost-conscious capitalists and won't be able to resist entirely an energy bargain. But here's hoping that Mr. Mathews is right and that a potentially short-lived era of cheap oil will not entirely derail China's clean-energy pursuit. The health of the planet depends on it.

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