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A U.S.-China War over Solar Power

By Daniel J. Graeber | Sun, 09 June 2013 00:00 | 2

The United States could try to work out a deal that would end ongoing tit-for-tat disputes over trade in solar energy products. Last week, the European Union said it would hit back at Chinese manufacturers for dumping their solar energy goods in the European market. The U.S. Commerce Department did more or less the same last year and a senior White House official testified last week that trade policies can only work if they're fair. With China and the United States debating how best to accommodate the other's claims to power, the White House may have a few rabbits up its sleeve to resolve issues related to global renewable energy and trade issues.

European Trade Commissioner Karel De Gucht last week said Chinese solar panels were sold on the European market below cost. This was giving Chinese manufacturers an unfair advantage over their European counterparts. In response, the EU said it would impose an 11 percent duty on Chinese solar panel imports. If China isn't willing to work out a compromise, that duty could increase to more than 47 percent by August.

Related article: Why Did Solar Stocks Soar?

"This has the potential to destroy an important industry in Europe if we don't act today," De Gucht said.

China dominates the world market in terms of production of solar panels. Exports of Chinese solar panels to the European market in 2011, the last year for which information is available, totaled $27 billion dollars. About a year ago, the U.S. Commerce Department targeted Chinese solar manufactures in one of the largest anti-dumping initiatives in U.S. history.  In the United States, China dominates the solar cell market, with about $3.1 billion worth of goods imported last year.

The Chinese government considers the renewable energy sector, solar power in particular, to be a vital component of a five-year development plan that runs through 2015. In a geopolitical climate that weighs military might more or less on par with economic strength, winning the solar race may be a shot over the U.S. bow given the high-profile bankruptcy of solar panel company Solyndra.

President Barack Obama met last week with Chinese President Xi Jinping in California as the U.S. military starts to shift its focus to the Asia-Pacific with the conflict in Afghanistan winding down. That's not necessarily an indication of pending war, at least not on the military front. If both world powers can figure out a way to work together on the margins of broader debates, there may be room for China and the United States at the top of the geopolitical heap, at least as far as the global low-carbon economy is concerned.

Related article: Solar Crisis: Cheap Chinese Solar Panels Prove Defective

Obama's international economic affairs adviser Mike Froman told a Senate panel last week during his nomination hearing to become a U.S. trade representative that broad-based trade policies can work, but only if they're fair. Lawmakers said they need to work with their Chinese and European counterparts on how best to settle the solar dispute. Froman said he was committed to open markets as well as effective trade laws that may work for both sides.

"There have been some initial discussions with both the European market and China about how to deal with this on a global basis," he said.

By. Daniela J. Graeber of Oilprice.com

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  • Ken Lelek on June 10 2013 said:
    The Chinese have definitely cornered the PV market. I can't see a solution to Chinese subsidised PV in the near future.
  • SA Kiteman on June 11 2013 said:
    The panel could be FREE and the power still wouldn't be worth the price paid for the balance of system. The capacity credit precludes any significant economical use.

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