China spent a staggering $34.6 billion in clean energy over the past year, almost double the United States' $18.6 billion, a study by the Pew Charitable Trusts said.
With $11.2 billion spent, Britain surprisingly claims the No. 3 spot, followed by Spain and Brazil. South Korea impressed with a 250 percent growth of installed capacity.
Overall, global investments in the sector more than doubled since 2005 and are projected to reach $200 billion in 2010.
"Countries are jockeying for leadership," said Phyllis Cuttino, who heads Pew's climate change division. "They know that investing in clean energy can renew manufacturing bases, and create export opportunities, jobs and businesses."
Over the course of a few years, China became the world's largest producer of solar cells and has a huge wind turbine production sector. It has set a goal of having a 30 gigawatt renewable energy capacity installed by 2020 but it will soon exceed that target.
Britain's ascent is due to huge government-backed offshore wind power projects and investments into the relatively young marine energy sector.
Countries with strong green policies -- including feed-in-tariffs, carbon markets, priority loans for renewable energy projects and mandated clean energy targets -- such as China, Brazil, Spain, Britain and Germany, have the most robust clean energy sectors as a percentage of their economies, the Pew researchers write. Countries without such policy frameworks, including the United States, Japan and Australia, lag behind.
"The United States' competitive position is at risk in the emerging clean energy economy," Cuttino said. "Our nation has a critical choice to make: pass the federal policies necessary to position us as the world leader in the large and growing global clean energy market or continue to watch as China and other countries race ahead."
The Pew researchers note that the United States' clean energy finance and investments lag behind many of other Group of 20 nations relative to the size of the U.S. economy.
"In relative terms, Spain invested five times more than the United States last year and China, Brazil and the United Kingdom invested three times more," the researchers write, adding that half of the G20 nations spent a greater percentage of their gross domestic product on clean energy. "Finally, the Unites States is on the verge of losing its leadership position in installed renewable energy capacity, with China surging in the last several years to a virtual tie."
Pew's study is based on figures on G20 nations collected by Bloomberg New Energy Finance, the international analysis and consultancy group.