The war in Ukraine has sent shockwaves through the global economy. In early March, crude oil prices surged to as high as $140 a barrel, a level last seen in 2008. While oil prices have since fallen from their peak, they remain high today, fueling already high inflation, hurting consumers around the world and hurting economic growth. In the face of this shock, countries are reassessing priorities and prioritizing resilience. The renewed prominence of food and energy security has forced governments to reintroduce fossil energy subsidies and expand domestic oil, gas and coal production, seemingly putting efforts to curb climate change on the back burner.

These reactions are understandable. Short-term tactical backsliding may be the price to pay for maintaining public support for long-term goals. But the economic case for accelerating climate action remains strong. For countries like China that have the domestic policy space to act, there are three key reasons to stick with the low-carbon transition and continue to peak early.

First, accelerating the pace of the energy transition to reduce dependence on oil and gas imports will help China improve its ability to withstand fluctuations in global fossil energy prices. Last year alone, China imported fossil fuels (oil, gas and coal) worth $365.7 billion, or more than 2 percent of its GDP. China's reliance on fossil energy imports leaves its economy vulnerable to fluctuations in global commodity prices. By contrast, renewable energy is essentially a domestic resource, and China is a major producer of key renewable technologies such as wind turbines and battery storage.

Second, while higher energy prices may boost global fossil supply in the short term, in the long run higher and more volatile energy prices will lead energy importers to further reduce their dependence on fossil fuels. This could spur action to reduce carbon in energy systems at both individual and global levels, increasing global demand for low-carbon technologies and alternative energy sources. In the face of this global shift, China can benefit from its technological capabilities by anticipating and acting first.

Third, rising energy prices challenge China's investment - and industrial-led growth model, underscoring the importance of accelerating structural change and economic rebalancing. High energy prices will make it even more necessary to reduce the economy's reliance on traditional investment and heavy industries, such as steel and cement production, which account for a large share of GDP but suffer from diminishing returns and low productivity growth. The slowdown in China's domestic property sector already points in this direction. As a result, higher energy prices are likely to help shift China's economy toward an innovation - and services-led growth model.

Even as policymakers focus on mitigating the economic and social impact of the recent dramatic changes in energy prices, there are steps that can be taken now to prepare for and reduce the cost of a low-carbon transition. For example, higher energy prices will spur more sustainable business models, but only if investors believe the trend will continue. That is why it is important to provide reliable long-term guidance on the expected trajectory of carbon pricing and other policies to reduce carbon emissions in the Chinese economy. Such guidance helps investors anticipate future price increases, and it also helps drive investment in clean energy without the need for immediate regulation or a higher carbon price. The current high energy prices are precisely the time to provide this forward guidance, as market price incentives are already pointing in the right direction.

Fiscal policy can complement the role of price signals by supporting needed economic adjustment, rather than slowing it down. To boost growth, the government may take additional stimulus measures, which could finance a wave of green investment projects to build and consume more renewable energy. In agriculture, higher fertilizer prices may induce farmers to reduce their overuse of fertilizer. However, this shift will be stymied if input-based subsidies remain in place. Instead, subsidies to farmers in the face of rising prices for agricultural inputs could be linked to a shift to resilient production methods. Field studies have shown that animal waste can be an effective substitute for fertilizer to achieve GHG reductions in agriculture without compromising yields. To achieve this transformation, more investment in agricultural extension is needed.

Finally, higher energy and food prices are likely to take a greater toll on poor and vulnerable households. Similarly, a more robust and targeted social safety net would do more to protect vulnerable groups in both urban and rural areas than a universal price subsidy. Providing such targeted protection ensures that price signals are not weakened and that the structural changes necessary for the transition to greener and more innovative growth patterns do not come at the cost of greater poverty and social inequality.

While the current energy price shock has added more headwinds to the near-term economic outlook, it has also increased the case for China to accelerate its energy transition. Policymakers should focus on the long term and use this opportunity to prepare.