Solar case shows climate protection requires globalized economy

Responses to President Trump’s imposition of tariffs on Chinese solar panels fall into two general camps.

One holds that Chinese solar manufacturing subsidies are so egregious as to require U.S. tariffs to deter additional subsidies by Beijing. Others believe the action is really just free-trade political posturing by Trump, and in practice, amounts only to a self-inflicted wound on the rapidly growing U.S. solar installation sector.

Neither perspective accounts, however, for the recent history of U.S. and Chinese solar subsidies, or indeed new subsidies for carbon capture and other clean energy sources that became law in the recent budget agreement.

{mosads}Examining this history reveals surprising lessons for U.S. policy, including the idea that an element of global cooperation on energy technology among economic competitors may be necessary to address the existential threat of climate change.

In addition, recognizing America’s competitive advantage in high-tech innovation and China’s in some areas of basic manufacturing has the potential, at least for some technologies, to yield benefits to both economies, while perhaps even reducing the threat of a trade war. 

In the face of the great recession, the Chinese government in 2008 devoted nearly half of its $650 billion stimulus package to clean energy manufacturing subsidies, with the major focus on solar photovoltaic panel production and electric vehicle manufacturing.

In contrast, the Obama administration stimulus package of almost $900 billion in 2009 provided less than 10 percent perhaps of the whole to energy. Most importantly, the U.S. stimulus focused its subsidies largely on tax incentives to deploy and install solar projects, not manufacture them.

Chinese photovoltaic panel subsidies ended up dominating the global market, cutting PV panel costs by more 80 percent from 2008 to 2013. Most analysts believe this massive cost cut led directly to the tripling of U.S. solar deployment in the last four years and enabled a newly vibrant and much larger U.S. PV installation industry that has employed hundreds of thousands of American workers.

This compares to only a few thousand workers in U.S. solar manufacturing, a number roughly similar to pre-recession levels. Industry experts generally believe the U.S. solar manufacturing industry was never in a position to compete globally with China and other nations with cheaper labor costs.

On balance, it now appears that the U.S. subsidy focus on solar deployment rather than manufacturing was the right decision, creating a robust new sector and tens of thousands of new jobs and cutting greenhouse emissions. 

While some uncertainties remain regarding the long-term implications of the solar subsidy experience, some important implications emerge for U.S trade, technology and climate policy.

Major nations with complementary competitive advantages, especially regarding different stages of a specific technology’s development, may prove an important component of successful clean technology deployment, eventually reducing costs for consumers everywhere.

Elements of this idea are evident in many international efforts including: the U.S.-China Clean Energy Research Center that conducts joint technology development; the Mission Innovation initiative in which 20 nations have pledged to double clean energy R&D; and the United Nations’ Green Climate Fund.

In each, there is a recognition that a certain level of cooperation even among direct economic competitor nations may be required to successfully address climate change.

Congress just passed legislation increasing a range of U.S. clean energy subsidies, including more than doubling tax credits for carbon capture, utilization and storage.

Deployment of CCUS technology is critical not just to allowing coal and natural gas to continue as major electric power sources in the U.S., but to deeply cutting U.S. domestic emissions, as well as those of China, India and other coal-rich nations.

In fact, the most advanced carbon capture approaches are being created at the joint U.S.-China Energy Research Center.

More broadly, energy technology development and climate protection might be conceived as more akin to nuclear weapons reduction negotiations in which fierce competitors still have common interests in making policy and investment decisions that will benefit all sides in the end rather than being seen only in terms of economic rivalry in a trade context.

One of the other great ongoing energy technology races involves production of electric vehicles, which have strong potential to be far cheaper and cleaner than combustion engines. Here, China has devoted even greater manufacturing subsidies than for solar production and has a resource advantage in the world’s largest deposits of key metals needed for many advanced batteries. 

But the U.S. also has advantages that may prove more important over time if they are supported. For example, American public investment in energy research and development is still the most productive in the world, though others like China are catching up.

Trump is attempting to defund the most important of these energy research programs, proposing 72-percent cuts in clean energy programs overall, but a few key Republicans have joined Democrats in protecting them, thus far. Nearly all major electric vehicle technical breakthroughs have been initially developed through U.S. federal funding.

Still, Chinese electric vehicle production subsidies are a problem. The fate of next generation of global auto manufacturing remains in the balance, and U.S. climate, trade and energy policies will play a role in the outcome.

A national network of electric vehicle charging stations funded in part through proposed infrastructure legislation is the type of opportunity that is being overlooked.

While the U.S. auto industry appears in far better position to compete with China’s electric vehicle subsidies than in solar panel production, additional public policy support could be of large economic and climate value for U.S. workers.

When asked what he thought about the French Revolution, Chou En Lai, a leading Chinese figure in the Cold War, reportedly replied, “It’s too early to tell.”

It may be too early to tell which energy technologies or strategies will win out in the clean energy revolution or whether any of them will be able to meet the fearsome challenge of climate change.

But one thing is clear: The simplistic economic, trade and climate policies of Donald Trump are not even close to the answer.

Paul Bledsoe is strategic advisor at the Progressive Policy Institute and professorial lecturer at American University’s Center for Environmental Policy. He served on the White House Climate Change Task Force under President Clinton and the Senate Finance Committee under Sen. Daniel Patrick Moynihan (D-N.Y.).