Renewable Energy Trade Disputes

Editor’s Note: EarthTechling is proud to repost this article courtesy of Worldwatch Institute. Author credit goes to Evan Musolino.

With the continued advancements in the development of renewable energy technologies and their ever-increasing cost competitiveness, there is more and more money at stake for countries and companies alike. A number of countries have recently found themselves at odds with one another over the international impact of certain domestic financial support policies for promoting renewables. The United States, China, Japan, Canada, and the European Union, discussed here, along with many others, currently find themselves on varying sides of major international trade disputes on this topic. High-end manufacturing of renewable energy technology components, and the money and jobs this brings with it, is becoming an increasingly important component for policymakers and an increasingly contentious issue at the international level.

The dispute between the United States and China over solar photovoltaic (PV) manufacturing is probably today’s most high-profile renewable energy trade dispute. The Chinese share of global solar PV manufacturing has grown at an incredibly fast pace since the country entered the market, as Chinese manufacturers have rapidly expanded from a 15 percent market share in 2006 to provide nearly half of the world’s total solar PV manufacturing output today. As of 2008 China produced 2,500 megawatts (MW) of solar cells, up from just 4 MW a decade earlier, as reported in the Worldwatch-REEEP report Renewable Energy and Energy Efficiency in China. With an existing installed capacity of 900 MW at the end of 2010, much of this production is being slated for export.

solar wind displacement of fossil fuels, oregon study

image via Shutterstock

The so-called “China price” of solar PV panels and cells manufactured in China is at the heart of the U.S. concern over this rapid growth. The U.S. government and American domestic manufacturers contend that their Chinese counterparts unfairly subsidize large portions of the manufacturing and export business, allowing Chinese companies to produce and sell products at artificially low prices and dump them on the U.S. market. U.S. manufacturers argue that the dumping margin on these imports is over 100 percent, meaning that they are being sold in U.S. markets at roughly half, or less, of their true cost.  The Chinese government provided $30 billion to solar manufacturers last year, roughly 20 times more than the financial support provided by the U.S. government. This is, of course, a challenge to U.S. manufacturers, as it is very difficult to keep their production cost-competitive with cheap Chinese imports.

In the meantime, the U.S. government is taking what it considers to be its own preventative action. A long-awaited Department of Commerce initial ruling on the issue was handed down this Tuesday. In a move called for by U.S. manufacturers, the department decided in favor of imposing tariffs on Chinese solar PV imports, setting rates between 2.9 and 4.73 percent, and mitigating what the department ruled to be unfair subsidies. While the coalition of manufacturers that brought the claim will no doubt be excited by the ruling, it will also be less than thrilled by the tariff rate.

The new tariff is significantly lower than the rates called for by American manufacturers, which ran as high as 100 percent, as well as the general consensus prior to the announcement, which put the expected tariff in the 20 to 30 percent range. An additional Commerce Department ruling on anti-dumping rates is expected to be issued in May this year. U.S. measures to protect domestic manufacturers also include the creation of a new Trade Enforcement Unit, which was introduced by President Obama during this year’s State of the Union address.

The United States cited Chinese imports as one main cause of the high-profile bankruptcy of the solar manufacturer Solyndra, and other companies like it, last year. Of course, China is not alone in providing support for its domestic renewable energy industry. Such support is one of the key measures that governments use to expand renewable energy deployment across the globe, with some type of government-directed fiscal incentive for renewable energy found in 80 countriesthrough early 2011.

Through research and outreach that inspire action, the Worldwatch Institute works to accelerate the transition to a sustainable world that meets human needs. The Institute’s top mission objectives are universal access to renewable energy and nutritious food, expansion of environmentally sound jobs and development, transformation of cultures from consumerism to sustainability, and an early end to population growth through healthy and intentional childbearing.

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