The following post is from Michael Mignano, Research Assistant for the BlueGreen Alliance.
The U.S. Department of Commerce recently affirmed tariffs on solar panels manufactured in China, and the International Trade Commission doubled down on the decision this past week. These decisions have led to much handwringing and fear mongering by free market ideologues who warn of trade wars with China. But as the dust settles from the decision, the reality of the solar future is much sunnier, in many parts thanks to the tariffs.
Over the last few years, the American solar industry has been thriving. The industry, with over an estimated 119,000 workers, grew 13.2% in 2012 – no doubt from support of the American Recovery and Reinvestment Act – with expected growth of 17% in 2013. The U.S. solar manufacturing industry – which employed over 29,000 workers at over 1,200 establishments in 2012, (though down from 2011 due to China’s unfair trade practices) has expectations to grow 9 percent in 2013. These developments are in no small terms encouraging, and tariffs on Chinese solar exporters will support this growth. Similar growth in the industry and installations was experienced in Europe.
In order to capitalize on consumer subsidies in the U.S. and Europe, China invested in creating the largest export solar market in the world. In fact, 95% of China’s solar production was exported in 2010, driven by “aggressive” Chinese government subsidies and handouts to solar manufacturers to cash in on consumer subsidies in other countries. China’s investment was so great, however, it ended up creating production capacity of over twice the global demand. As such, the chief executive of China’s biggest solar panel manufacturer even told the New York Times that his company was “selling solar panels on the American market for less than the cost of the materials, assembly and shipping” — an economic occurrence known as dumping — though he later retracted his comment.
As artificially cheap solar panels from China — cheapened by illegal export subsidies and lax labor and environmental standards — distorted the global price of panels and threatened American manufacturing jobs, the U.S. and a coalition of solar manufacturing companies fought back, citing WTO rules that forbid export subsidies. And the flood of subsidized solar panels slowed.
The move prompted China to do something it never had before: develop a domestic market for the mountains of solar panels piling up behind its factories. While the economics of China’s oversupply will need to work itself out, we’ve seen some really interesting developments. China recently announced it will make it easier for small-scale distributed solar projects to connect to the grid and increase domestic subsidies, while providing “technological assistance” and waiving connection charges. As China solidifies its support for a domestic solar market, installed solar capacity in China increased more than 400% this year compared to last year, and the China State Grid purchase of solar power increased more than 500% over the previous year. Make no mistake that the changing international market — tariffs included — played a big role in China’s decision to invest in domestic solar installations and solar electricity purchasing. Without incentive to build up its domestic market, China would continue its role as the world’s factory, polluting its environment and people.
This is all promising news. The energy hungry country largely relies on coal to power to its economic development. The resulting pollution, human health costs, and social destabilization are impediments to a just and sustainable future in China and abroad. Increased solar power generation in China is a good step, albeit a small one. And international attention to ensuring that trade is fair and sustainable is what we should advocate for — not against. Trade that ignores the conditions of production, quietly but irrefutably supports the environmental and human costs of unrealistically cheap products, while shipping good American jobs overseas.
Instead of warning of trade wars and turning a blind eye to our unsustainable consumption and the problematic conditions of production in China, the U.S. needs to take action. To support sustainable growth in the solar industry that ensures environmental protection through all stages of production and respects the health, safety, and well-being of workers and communities, the U.S. must:
- Support the U.S. solar industry, promoting American-Made solar products as the environmentally responsible consumer choice;
- Join its allies in the labor movement in supporting the U.S. trade cases against heavily and unfairly subsidized Chinese renewable energy products;
- Develop investments, policy, and incentives to grow and support the U.S. renewables industry as a whole;
- Challenge U.S. solar producers to employ even stricter environmental and labor protections; and
- Encourage the Chinese government to enforce its own environmental and labor laws and shift its solar export subsidies to incentives for domestic market consumption.