The United States’ competition with China, which last year escalated to a trade war that cost tens of billions of dollars, has been a primary focus of the current administration’s effort to “put America first.” But from the steep economic costs of that trade war to America’s withdrawal from the Paris climate agreement and the World Health Organization, America is losing its position as the world’s leading superpower and economy.

Nowhere is U.S.-China competition more fierce than in advanced technological sectors — what has been termed the “technology cold war” — and China has already dominated clean energy industries. But China’s ascension to technological dominance is not inevitable. In order for the U.S. to retain its lead in tech and compete more effectively in clean energy, it needs to act quickly — and the first step is to recognize how China has attained its leading position.

The conventional story of China’s economic rise isn’t complicated. China has cheap access to labor and capital by virtue of its large population and supportive government. Its state capitalist system allows the government to support favored industries by giving land grants to build factories, low- or zero-interest loans for working capital, and subsidies for finished products.

This is the most ubiquitous explanation for why the solar panels you see on a rooftop or in a small solar array alongside a stretch of highway are almost certainly from Chinese firms. China controls almost 60 percent of the solar market worldwide, purportedly because China’s government and cheap labor enable the country to produce and sell panels for far less than anyone else can produce them.

The problem with this explanation is that it’s mostly wrong. The silicon chip at the heart of your phone or laptop — made from the same polysilicon material of solar panels and with similar equipment — may have been manufactured in China, but it was likely made by an American semiconductor company. If cheap labor and capital explained China’s advantage, the country would also dominate the semiconductor industry. In fact, the Chinese government invested far more over a much longer period into the semiconductor industry than into solar. But China only controls 5 percent of the semiconductor market.

This is part of a broader pattern. Over the past two decades, China has dominated the clean energy sector but has struggled to break through in other advanced technological industries, from artificial intelligence to 3D printing.

Why the difference between these other sectors and clean energy? Clearly, cheap capital and labor are an advantage, but they don’t tell the whole story. A better explanation of China’s success in solar is that the energy industry prioritizes low costs and China excels at cost-cutting and scaling — not just from cheap resources but from a superior ability to innovate manufacturing processes to drive down cost and scale quickly, known as process innovation.

Also important is the slow rate of product innovation — technological innovation that enhances performance — in solar. A rapid rate of product innovation makes performance competition more important, favoring the United States’ historically unmatched research and development infrastructure and human capital. But a slow rate of innovation favors China’s cost-cutting proficiency and advantages in process innovation.

Semiconductors have maintained a breakneck rate of innovation — famously, it has been argued that if automotive technology had advanced at the same rate, a Rolls-Royce “could circle the globe eight times on one gallon of gas, with a top speed of 2.4 million mph.” But solar technology has advanced relatively slowly, with little improvement in commercial efficiency; this has resulted in a uniform market, with panels viewed as interchangeable commodities and price constituting the sole basis for competition. While U.S. companies could push the envelope further and faster in semiconductors, China could cut costs deeper and scale faster in solar, which did not advance as quickly.

The energy industry favors low costs over high performance for two additional reasons. One is that the performance of an energy product on the grid has little effect on the experience of consuming electricity — energy products are distant from consumers. Because performance has less effect on your experience, utilities will buy cheaper panels instead of paying a premium for high performance. If the product is closer to consumers and performance matters more, then consumers will be willing to pay more for higher performance — and the performance of the semiconductors in our phones is certainly closer to our experience.

The second reason is that solar companies aren’t just competing with other solar companies; they’re also competing against other producers of electricity such as coal, oil and natural gas. This inter-industry competition also makes price more important than performance, especially versus the low-cost incumbents, coal and gas. China’s process-innovation advantage and cheap capital have given it an edge because the clean energy industry values price over performance.

How can the U.S. change this picture?

A straightforward first step is for Congress to eliminate fossil fuel subsidies, which currently total around $20 billion each year, in order to alleviate inter-industry competition. The U.S. government cannot shield clean energy companies from inter-industry competition as much as the Chinese government does, but it can at least level the playing field.

The U.S. can then invest to spur innovation in clean energy technologies. Increased funding for research, development, demonstration and deployment can accelerate the rate of innovation in clean energy, playing to the United States’ comparative advantage. The government should also incentivize distributed renewable energy projects to move products closer to consumers, which will make performance and reliability more important.

The U.S. also must safeguard its comparative advantage in technological innovation, which, if China’s early lead in 5G is any indication, may be in danger. Investing into research, development, demonstration and deployment is a big piece of maintaining that advantage, but so is investing in STEM education and restoring and improving visa programs for talented immigrant workers. Human capital is the key to winning in innovation.

A post-pandemic stimulus package could get the ball rolling by dedicating funds to innovation and shaping industry incentives to benefit nascent and high-performance technologies, rather than simply rewarding least-cost producers.

We need clean energy to combat climate change, and the urgency of that need is increasing. As the industry grows to meet it — with more solar panels rolling out across the world, more turbine spires sprouting on hills and in oceans, and exciting new clean energy technologies reaching the market — clean energy will become one of the largest and most important technological industries in the global economy. If we take a lesson from the chips in our phones, the U.S. can lead it.

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David W. Yellen is a program assistant at the Atlantic Council Global Energy Center.