A Chasm in Solar Energy?

Competition is heating up in the solar industry.  On October 19, 2011, a group of companies forming the Coalition for American Solar Manufacturing (CASM) filed petitions in the U.S. Department of Commerce and the U.S. International Trade Commission (ITC), asking the government to impose duties on cheap solar cells imported from China.[1]  Within weeks, a separate group of solar producers formed the Coalition for Affordable Solar Energy (CASE) to oppose increased tariffs.[2]  Coming on the heels of the very public bankruptcy of U.S. manufacturer Solyndra,[3] the CASM–CASE division invokes the question of whether clean energy technologies are the business-friendly solution to reducing CO2 emissions.

At issue in the CASM petition is whether crystalline silicon photovoltaic cell imports harm the U.S. solar industry due to government subsidies that allow Chinese manufacturers to sell their products below market price, a practice known as “dumping.”  CASM has already received the support of United Steelworkers,[4] which requested that the U.S. investigate China’s subsidies for wind turbine equipment back in September 2010.  In that case, China agreed to withdraw the subsidies during initial consultations with the U.S.[5]

Neither subsidies nor dumping are illegal per se under international law.  These types of trade measures are regulated, however, through the World Trade Organization (WTO).  For example, government grants cannot be conditioned on export,[6] but can be awarded to private industries on an objective basis.[7]  As long as WTO members comply with WTO law, they can unilaterally increase tariffs to offset trade distortions due to a foreign government’s influence on the market.[8]

Clean energy subsidies make sense to support industries that cannot yet compete with conventional sources of energy.  Because photovoltaic cells are expensive to produce and run at only about 10-20% efficiency,[9] solar power costs more than twice as much as coal or natural gas.[10]  The better way to drive down the costs of solar power is to invest in researching new and more efficient materials.  For its part, CASE argues that tariffs could increase costs throughout the industry and spur a trade war at odds with U.S. interests.  These comments require some perspective in that at least several of CASE’s members are the U.S. subsidiaries of Chinese solar companies.  Yet, the fact that China recently pulled out of a $500 million project[11] and has initiated its own investigation as to whether the U.S. has stifled its renewable energy industry warrants caution in trade retaliation.[12]  Overcorrecting for cheap imports risks undermining other important areas of cooperation, such as the U.S.–China Clean Energy Research Center (CERC).[13]  The U.S. government will have to carefully weigh competing interests in deciding whether to impose duties; preliminary determinations are due from Commerce and the ITC by December 5, 2011.

– By Kirsten Johnson, Articles Editor 

[1] Press release, Coalition for American Solar Manufacturing, U.S. Manufacturers of Solar Cells File Dumping and Subsidy Petitions Against China (Oct. 19, 2011), available at http://www.americansolarmanufacturing.org/news-releases/10-19-11-casm-files-illegal-dumping-subsidy-petition.pdf.

[2] See Coalition for Affordable Solar Energy, http://coalition4affordablesolar.org.

[3] See, e.g., Matthew L. Wald, Panel Hears Defense of Loan to Solyndra, N.Y. Times, Nov. 17, 2011, at B10.

[4] Letter from Leo W. Gerard, Int’l President, United Steelworkers, to John E. Bryson, Sec’y, Dept. of Commerce, and James R. Holbein, Sec’y, U.S. Int’l Trade Comm’n (Nov. 7, 2011).

[5] Press Release, Office of the U.S. Trade Representative, China Ends Wind Power Equipment Subsidies Challenged by the United States in WTO Dispute (Jun. 7, 2011), available at http://www.ustr.gov/about-us/press-office/press-releases/2011/june/china-ends-wind-power-equipment-subsidies-challenged.

[6] Agreement on Subsidies and Countervailing Measures art. 3.1(a), Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1867 U.N.T.S. 14.

[7] See id. art. 2.1(b).

[8] Id. art. 10.

[9] Robert F. Service, Outlook Brightens for Plastic Solar Cells, 332 Sci. 293 (2011).

[10] See Russell Gold, Wind, Solar Energy Still Face Big Hurdles —Solar Gains Traction, Thanks to Subsidies, Wall St. J., Mar. 31, 2011, at B1.

[11] Zhou Xin & Nick Edwards, China Shelves U.S. Solar Project in Trade Row, Reuters.com (Nov. 7, 2011), available at http://www.reuters.com/article/2011/11/07/us-china-us-solar-idUSTRE7A61OL20111107.

[12] Keith Bradsher, China Looks Into U.S. Energy Trade Policies, N.Y. Times, Nov. 25, 2011, at B6.

[13] Information on CERC is available at http://www.us-china-cerc.org/index.html.

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