Renewable Energy Trade Disputes

American manufacturers feel, however, that they are unable to compete with what they see as artificially low prices on components coming from Chinese factories in particular. A recent NREL study determined that Chinese manufacturers actually face a 5 percent true-cost disadvantage, when trans-oceanic shipping costs are taken into account, compared to U.S. manufacturers, and it is “massive government subsidies” that have driven their export strength. India has expressed concerns about Chinese manufacturing that are similar to those coming from the United States, and some foresee a formal complaint coming from India on this matter as well.

It is undeniable that the decrease in manufacturing prices for renewable technologies, such as solar PV, has contributed to their recent incredible growth levels. Last year alone, the cost of solar PV panels decreased by 30 percent. These cost reductions are being matched with increased deployment: for example, 16.6 gigawatts (GW) of new solar power capacity was installed between 2009 and 2010, bringing the global capacity to 40 GW by the end of 2010. The United States installed 2.5 GW of new solar PV capacity during that period.

Solar Installation Field

image via Shutterstock

While decreased production costs may prove difficult for American manufacturers to compete with, a host of other jobs are reliant on the growing use of the technology.  A 100-percent tariff on solar imports from China, as had been called for by some manufacturers, has been estimated by some to be enough to decrease the U.S. workforce by 50,000 net jobs over the next three years, although this outcome is disputed by others. Alternative analysis has predicted long-term net job gainsresulting from the tariff; however, the impact of raising costs would appear to be at the very least a temporary setback for the U.S. solar sector as a whole, and especially painful for installers who rely on growing solar PV demand driven by decreasing prices.

Similar to the United States and China, Japan and Canada have found themselves entangled in a trade dispute centered around renewable energy support policies as well. Japan has challenged the legality of the Feed-in Tariff (FIT) program covering multi-technology renewable development in the Canadian province of Ontario since first bringing it to the attention of the WTO in 2010. Japan was joined by the EU at the beginning of 2012 to challenge the domestic-content provision promoted in the Ontario law.  The “made-in-Ontario” provision features a stipulation requiring a “minimum required domestic content level” to qualify for the financial support offered by the FIT. This level varies depending on the technology being used and the scale being promoted, but ranges from a minimum of 25 percent to a maximum of 60 percent domestic content required to be eligible for FIT support.

The legality of FITs themselves is not being challenged by Japan or the EU; in fact, Japan, 21 EU member-states, as well as 65 other countries, states, and provinces worldwide, had their own FIT laws as of early 2011. Japan and the EU contend that this specific provision of the Ontario law unfairly promotes domestic manufacturing, and does not comply with certain rules set out under the General Agreement on Tariffs and Trades (GATT).

The Ontario FIT is nearing the end of its scheduled review phase, with recommendations expected at the end of March, though the provincial government is steadfast in its assertion that the local content provision will not be changed. Interestingly, while the Canadian federal government is beholden to WTO rulings, individual provinces are not, meaning any potential ruling against Ontario would most likely be unenforceable as the Canadian federal government does not have authority over the Ontario FIT law.

Government support programs for renewable energy will not be going away anytime soon, although the outcome of these international disputes could significantly affect the tools governments have at their disposal for promoting their own domestic renewable sectors. In fact, some European countries are distancing themselves from the EU challenge as they have similar FIT programs in place. As renewables continue to grow, there will be increasingly more money at stake for these countries and companies competing within the international market, and it would not be surprising to see more cases like these continue to arise.

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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