It’s often helpful to compare our progress against the rest of the world—especially if another country’s success can help boost our own energy efficiency practices. With that in mind, on more than one occasion, I’ve highlighted the energy efficiency, renewable energy, and or onsite power activities taking place in the international community. In last month’s blog entry entitled “China Pulls the Plug”, I discussed how China is using punitive measures to promote energy efficiency, and I asked, “are there any lessons to be learned from the actions of the Chinese government?”
How you answer that question depends in part on how you interpret the Chinese government’s energy subsidies and its stance when it comes to the World Trade Organization’s (WTO) protocol. A good summary of the situation in China can be found over at the New York Times (NYT), which, over the weekend, published a feature article—“On Clean Energy, China Skirts Rules”, by Keith Bradsher [read more...]. The article reviews the ins and outs of the Chinese government’s subsidization of its renewable energy industry.
As Bradsher summarizes, “the booming Chinese clean energy sector, now more than a million jobs strong, is quickly coming to dominate the production of technologies essential to slowing global warming and other forms of air pollution.” The Chinese government has achieved this domination through a series of heavy-handed subsidization, including government-funded land transfers and government-backed low-interest loans. The Chinese are also manipulating the trade environment to make renewable energy manufacturing and export easy and lucrative by pumping over $1 billion per day into the currency markets and reducing the export of raw materials essential to the manufacture of wind turbines and solar panels.
Of course, these actions by the Chinese government put them in direct violation of regulations imposed by both the WTO and the International Monetary Fund (IMF). In response to allegations that it is participating in unfair trade practices and violating international agreements, China is casting itself as “ a developing country struggling to understand its commitments,” thereby relieving itself of the responsibility to act within the rules and regulations being followed by the international community.
Why should we care about China’s renewable energy subsidies? First and foremost, because of the unfair advantage these subsidies give the Chinese on the world market—enabling their companies to offer goods and services at a reduced rate. For example, according to the NYT, the average US manufactured wind turbine sells for $850,000 a megawatt of capacity. The average Chinese turbine: $685,000 per megawatt. This dominance also means that other nations may find themselves “overly dependent on a Chinese industry whose approach to the business may not be economically or politically sustainable.” Finally, “Other countries may also become less enthusiastic about subsidizing renewable energy if it means importing more goods from China instead of creating jobs at home.”
And make no mistake China’s actions are directly affecting our domestic renewable energy industries—affecting both jobs and investment. As Bradsher summarizes, “China’s expansion has been traumatic for American and European solar power manufacturers, and Western wind turbine makers are now bracing to compete with low-cost Chinese exports.” For example, so far this year, a solar panel manufacturing facility in Frederick, MD, was shut down by BP, and Evergreen Solar in Marlboro, MA, will eliminate 300 US jobs when it transfers its manufacturing center to China next summer. And China will continue to have the advantage as long as it makes low-interest loans from government-run banks available to its domestic renewable energy companies.
So what do you think? Are the gains being made by China transitory? Could an implosion in their real estate market or definitive action by the WTO or IMF (or even other national governments) cripple China’s current economic strength? Should the US government be doing more to help domestic companies compete in this global market, or can a “survival of the fittest” mentality make our renewable energy manufacturers stronger and more efficient in the long run? And is the absence of an onsite power component the fatal flaw in the Chinese methodology?