The benefits of eliminating trade barriers on environmental goods: preliminary results
Brian S. Fisher, Raymond Mi and Marie Gillardeau
Paper presented at the Public Forum 2014, Why trade matters to everyone, World Trade Organisation, Geneva, 1-‐3 October 2014
Content
• Background: Definition of environmental goods, recent trade disputes on solar modules
• Gains from international trade: does it apply to solar modules?
• Modelling framework: BAEconomics’s Computable General Equilibrium Model (BAEGEM)
• Results • Caveats • Conclusions
Definition of environmental goods
Goods that ‘measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and eco-‐systems ... [including] cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use’ (OECD/Eurostat 1999).
Broadly speaking, environmental goods can be divided into two categories, which are not mutually exclusive:
• Goods that are integral to the delivery of environmental services (e.g. waste management).
• Environmentally preferable products (EPPs) are single-‐used products whose primary purpose is not environmental but environmental benefits arise at some point in their life cycle: production (e.g. non-‐CO2 emitting production process), consumption (e.g. renewable electricity generated by solar or wind) or disposal (e.g. jute bags).
Limitations:
• How to define what is ‘preferable’?
• How to classify goods with multiple end-‐uses, not limited to environmental purposes? (e.g. pipes for solar hot water systems vs. pipes also used for oil).
However, there is no consensus on the boundary
• The UN 6-‐digit Harmonized System (HS) code is the most commonly used product category by WTO members. However, environment goods are so broad that they are not under a single HS 6-‐digit or multiple 6-‐digit categories. Today many WTO members have developed their own system to disaggregate the 6-‐digit HS system into levels of 8, 10 or more digits.
• Estimation of global trade of environmental goods is hard because there are no international harmonized product codes beyond the 6-‐digit HS system.
• The difficulty of not having a detailed and universal classification of environmental goods has contributed to a lack of progress in multilateral negotiations.
• Recently, APEC nominated 54 HS-‐6 product categories as environmental goods. Based on this definition, the United States exported $106 billion worth of environmental goods in 2013, including wind turbines, solar panels, and wastewater treatment technologies. Global trade in environmental goods was estimated at nearly $500 billion in 2011 (ICTSD 2013).
Around 21% of environmental goods are subject to tariff rates above 5%
• Tariffs on environmental goods are low, although some WTO Members can charge tariffs as high as 35% on some environmental goods. Tariff protection is higher in developing countries.
• China, a large importer, has about a third of its tariff lines (43) above the 5% threshold with maximum rates as high as 35%. Solar cells and solar modules are under HS 854140.
APEC tariff structure for the 54 HS-‐6-‐level environmental goods -‐ selected countries, 2011
Country *Average applied MFN tariff %
Maximum tariff % Number of tariff lines for environmental goods
Tariff lines above 5%
Australia 2.61 5 70 0%
Chile 6 6 80 100%
China 4.99 35 121 36%
Indonesia 2.87 15 161 11%
Japan 0.04 2 72 0%
Russia 8.55 20 157 60%
Singapore 0 0 159 0%
United States 1.46 16 168 7%
APEC countries 2.59 35 2636 21%
Data source: Melo and Vijil (2014).
Global trade in environmental goods: Photosensitive semiconductor devices (HS 854140*)
0
5,000
10,000
15,000
20,000
25,000
30,000
2005 2006 2007 2008 2009 2010 2011
$US million
China Other Asia Japan Australia EU-‐28 USA
*Including photosensi1ve semiconductor devices, photovoltaic cells whether/not assembled in modules/made up into panels and LEDs
Exports of PV cells and modules* to the world
The market for solar panels grew rapidly over the period 2005-‐2011, with global solar annual capacity increasing at more than 80% a year.
Numerous support measures ranging from FIT, capital cost subsidies, carbon taxes and renewable energy also drove the recent growth.
Data source: UN Comtrade (2014)
Large reductions in solar module prices is an important driver of recent rapid growth in demand
Price of solar modules (USD/W)
Data source: Barbose et al. (2013)
The graph shows the linkages between installed system prices and PV module prices in the United States. The implied non-‐module costs are calculated as the difference between the total installed price and the global module price.
Since 2008, the costs of modules and components have been declining. Over the long-‐term, installed system prices have contracted as a result of falling module and non-‐module costs (e.g. inverters, hardware, installation).
Large&reductions&in&solar&module&prices&is&an&important&driver&of&recent&rapid&growth&in&demand&
Price&of&solar&modules&and&system&installations&&(USD/MW)&
Data$source:$Barbose$et$al.$(2013)$
$
Tracking the Sun VI: The Installed Price of Photovoltaics in the United States from 1998 to 2012 15
constituting roughly 80% of the total $3.3/W decline in the installed price of �10 kW systems over that period. It is evident, however, that the year-by-year installed price declines did not proceed in perfect lock-step with module prices. For example, module prices dropped by $1.1/W from 2008 to 2009, while total installed prices fell by only $0.4/W over that year. Installed prices then began their dramatic descent a year later, suggestive of a lag between movements in module prices and installed system prices.15 Conversely, in the last year of the historical period, from 2011 to 2012, total installed prices fell by a notably larger amount ($0.9/W) than the decline in the module price index ($0.5/W), potentially as a result of reductions in non-module costs over that time frame as well as module price reductions in preceding years. Notwithstanding the imperfect correlation, it is nevertheless clear that the installed price declines in recent years are primarily the result of rapidly falling module prices.
Notes: The Global Module Price Index is Navigant Consulting’s module price index for large-quantity buyers (Mints 2012) and the successor index for first-buyer ASPs published by Paula Mints Solar PV Market Research (Mints 2013). "Implied Non-Module Costs" are calculated as the Total Installed Price minus the Global Module Price Index.
Figure 9. Installed Price, Module Price Index, and Implied Non-Module Costs over Time for
Residential & Commercial PV Systems �10 kW
Over the longer term, however, installed prices have fallen also as a result of reductions in non-module costs (which include such items as inverters, mounting hardware, labor, permitting and fees, overhead, taxes, and installer profit).16 The “implied non-module costs” presented in Figure 9 are a residual term, calculated as the difference between the total installed price for systems �10 kW and the module price index in each year, and provide a rough proxy for non-module costs over time for this system size range.17 Given the manner in which this residual term is calculated, it is not a 15 The fact that movements in the global module price index are not immediately reflected in total installed price may reflect any number of underlying dynamics, including: differences in time between when installation contracts are signed and when systems are actually installed, excess module inventory by system installers, supply and delivery constraints among installers or component manufacturers, a lack of competitive pressure in particular markets resulting in value-based rather than cost-based pricing, a divergence between global and domestic module prices, or differences between module prices paid by large-quantity buyers (the basis for this index) and installers more generally (which may face a larger distributer mark-up). 16 The line between module costs and non-module costs can become somewhat blurred in cases such as modules with integrated racking and AC modules with micro-inverters, which also impact design and installation costs. 17 Inverters represent the single largest hardware cost within the residual “non-module cost” term. Over the course of 2012, average residential inverter prices in the U.S. declined from $0.34/W to $0.30/W (SEIA/GTM 2013a).
$0
$2
$4
$6
$8
$10
$12
$14
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Installation Year
Total Installed Price (Median)Global Module Price IndexImplied Non-Module Costs
Residential & Commercial PV Systems �10 kW
2012
$/W
DC
The$graph$shows$the$linkages$between$installed$system$prices$and$PV$module$prices$in$the$
United$States.$The$implied$nonEmodule$costs$are$calculated$as$the$difference$between$the$
total$installed$price$and$the$global$module$price.$$
Since$2008,$the$costs$of$modules$and$components$have$been$declining.$Over$the$longEterm,$
installed$system$prices$have$contracted$as$a$result$of$falling$module$and$nonEmodule$costs$
(e.g.$inverters,$hardware,$installation).$
LCOE generated by solar panels has fallen to a level lower than retail electricity price
Data source: World Energy Council (2013); IEA (2012).
Levelised cost of PV electricity over time (developed market average) and indicative household retails electricity prices in selected countries (USD/MWh)
The decline in production cost of solar modules have pushed LCOEs of solar energy down over the past two decades, in a global market that is dominated by China (IEA 2013a, 2013b).
In Germany and Italy, PV has reached grid parity : LCOEs of solar energy are now lower than retail electricity price (World Energy Council, 2013). PV has also reach grid parity in parts of Australia and Canada. However, the competitiveness of PV installations is not entirely determined by LCOE, but the conditions for the sale of excess electricity back into the grid.
Cost of Energy Technologies World Energy Council 201318
Solar PV
Global installed capacity for PV has historically been dominated by Europe where govern-ment incentive schemes have spurred large deployment, for example in Germany and Italy. From 2007–2011 Europe accounted for 70–80% of total installations. That fell to 50% in 2012 and will continue to decline, likely to 20% by 2015, as China and Japan become the growth markets.
The last few years have witnessed more or less consistent declines in the cost of modules and underlying components, pushing LCOEs lower and lower in a market increasingly dom-inated by Chinese suppliers. PV economics differ substantially between plants >1MW and smaller distributed retail or commercial rooftop plants. For this report we concentrate only on larger projects.
Figure 6Levelised cost of PV electricity over time, developed market average (USD/MWh)Source: Bloomberg New Energy Finance
Thin film
c-Si
c-Si tracking
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100
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350
Q3 Q4 Q1 Q2 Q3 Q4
2009 2010
Q1 Q2 Q3 Q4
2011
Q1 Q2 Q3 Q4
2012
Q1 Q2
2013
Feed-in tariffs driven growth combined with a rapid fall in module prices have made solar PV more competitive over recent years, spurring a boom in the sector. This rapid growth has prompted governments to scale back feed-in tariffs to avoid budget overshoot.
In markets and locations with more expensive power, such as in parts of Germany, com-panies are now finding it more cost-effective to use the power from solar cells themselves – referred to as auto-consumption – rather than claim the feed-in tariff. Installation continues there: the country installed nearly 800MW in Q1 2013 and over 1,000MW in Q2 2013 even as feed-in tariffs for new installations fell – driven in part by the trend towards auto-consumption.
With the diminishing prospects in Western Europe attention is now focused on China and Japan, the new main drivers of the global PV market. In China, solar PV has relatively few barriers to growth. It is competitive with conventional energy for commercial users but is more expensive for residential consumers. Here, most of the 35GW capacity target for 2015 will therefore be met by large-scale, >1MW installations and distributed generation in the commer-cial sector. A 2020 target of 50GW solar PV generation exists, supported by a national feed-in tariff and a system of subsidies. A boom in solar installations is underway in Japan, with the country’s new generous feed-in tariffs making solar PV a very attractive prospect. The program has incentivised a large build there, with nearly 800MW of approved capacity as of early Q2.
Australia)
USA)
China)
Germany)&)Japan)
Canada)
China has become the largest producer of solar modules, driven by low production costs, a super-‐fast learning curve and easy access to finance
Data source: World Energy Council (2013)
Global production solar modules (MW)
• The global production of solar PV increased by more than 20-‐fold from 2005 to 2012. In 7 years, the production level in China jumped by more than 10000%.
• Over the past decade, production of solar PV has experienced a dramatic shift from developed countries to developing countries, largely driven by their comparative advantage on labour cost.
MW 2005 2006 2010 2011 2012
US 154 202 1200 800 1000
Taiwan 0 0 3400 4500 5500
Japan 833 928 2200 2069 2400
Europe 470 657 3120 2078 2000
China 200 400 10800 19800 21000
Other 102 314 3280 6031 5500
Total 1759 2501 24000 35278 37400
The alleged dumping of solar modules in the US: findings of the US Department of Commerce, June 2014
Some silicon PV products from China were sold in the US at dumping margins (amount by which the export price is less than the normal value) between 26.33% and 165.04% (US Dept. of Commerce, 2014). Products from Taiwan received preliminary dumping margins between 27.59% and 44.18%.
The anti-‐dumping duties set by the US on solar PV cells and panels imported from China would range from 18.56% and 35.21%, applied to both panels and cells.
The WTO declared that the imposition of US tariffs on imports of Chinese solar PV violates the rules of international trade and could increase the costs of solar products in the US by 14%.
The US Department of Commerce is scheduled to announce its final determinations around mid-‐December 2014 and the International Trade Commission in January 2015.
The Australian Government’s Anti-‐Dumping Commission is currently investigating the alleged dumping of Chinese produced solar PV modules and panels.
The alleged dumping of solar modules in the EU: findings of the European Commission, December 2013
Following more than a year of investigations in the anti-‐dumping and anti-‐subsidy cases:
Anti-‐dumping duties will range from 27.3% to 64.9%, with a residual anti-‐dumping duty of 53.4% for non-‐cooperating companies in the investigation.
Anti-‐subsidy duties will range from 3.5% to 11.5% (one exemption), with a residual anti-‐subsidy duty of 11.5% for non-‐cooperating companies in the investigation (European commission, 2013).
The Commission had found that Chinese exporters were selling solar panels and modules in Europe far below their normal prices and receiving illegal subsidies, impairing European producers.
These duty rates apply only to those exports from China which do not meet the conditions set out in the undertaking (annual quota of 7GW and floor price of 53 cents/W).
These definitive anti-‐dumping and anti-‐subsidy duty rates apply only to those exports from China which do not meet the conditions set out in a price undertaking agreed upon in August 2013 (about 25% of Chinese solar panel exports to the EU).
Solar industries in developed economies benefit from subsidies
• ‘Specific’ subsidies provided to industries by WTO member countries are regulated by the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement). The WTO Anti-‐dumping Agreement allows member countries to act against dumping where there is genuine (material) injury to the competing domestic industry. • Subsidies to consumers or ‘non-‐specific’ subsidies to industries for their purchases of specific types of goods (eg solar panels) are not regulated by the WTO.
• In Australia, non-‐specific subsidies through renewable energy certificates are provided to consumers and industries for their procurement of solar panels. In 2013, Australian energy retailers bought around 20 million renewable energy certificates, or $A0.77 billion, for solar panel installation in Australia. More than 99 per cent of these solar panels are imported from overseas.
Data source: IEA
Key questions to be examined
Context: The EU and the US apply anti-‐dumping and anti-‐subsidy tariffs on solar panels imported from China.
Question 1: What are the implications on supply and demand if the current anti-‐
dumping and anti-‐subsidy tariffs were removed? Question 2: How many tonnes of GHG emissions could be reduced if there are no
anti-‐dumping and anti-‐subsidy tariffs? Is it significant? Question 3: Neoclassical trade theories suggest that trade liberalisation brings
benefits to consumers and contributes to growth. Are these theories applicable in this context?
Question 4: Would the EU and the US be better-‐off or worse-‐off if the current anti-‐
dumping and anti-‐subsidy tariffs were removed?
Gains from international trade: does it apply to the recent trade disputes on solar panels?
Without subsidies, neoclassical theory suggests that both countries will gain under a 2-‐commodities, 2 countries model
Ricardian model Heckscher-‐Ohlin model
• 2 countries, 2 commodities, 1 mobile factor (labour).
• Focus on comparative advantage, i.e. countries specialize in the production of good they can do best,
• Trade occurs between the 2 countries because of differences in labour productivity, itself due to technological differences.
• Short-‐run scope because technology can change over time.
• 2 countries, 2 commodities, 2 mobile factors (labour and capital).
• Builds on Ricardo’s comparative advantage theory. • One country has a comparative advantage over the
other due to differences in relative amounts of each factor.
• Commodity X is labour-‐intensive and commodity Y is capital-‐intensive. Resources fully-‐employed in both countries.
• No trade barriers. • Countries should export (import) what they have in
abundance (short supply). • In the long-‐run countries have same technology. • RedistribuKon of wealth between labour and
owners of capital
Ricardian theory: A simple 2-‐commodity, 2 country model
Country B has the absolute advantage in producing both products but has a comparative advantage in good 1 because, relatively, it is more productive in making good 1.
B"
A"
B’"
A’"
A’2"
A’1"
A2"
A1"
B’2"
B’1"
B1"
B2"
6"
21"
35"30"
Country"B"is""3.5"3mes"more""produc3ve"at"producing""good"1"
Country"B"is"only"1.7"3mes"more""produc3ve"at"producing"good"2"
A’1"+"B’1">"A1"+"B1"A’2"+"B’2">"A2"+"B2"
Gains"from"trade:"
Heckscher-‐Ohlin theory: A simple 2-‐commodity, 2 country model
In autarky (A) production equals consumption (yellow lines). With free trade (FT), the relative price PL/PK falls (rises) for the country producing capital-‐ (labor-‐) intensive goods. The country has an advantage over the other in terms of factor allocation, capital (k) or labour (L), will specialize their production accordingly (YFT) .
After trade, consumption (CFT) will not equal to production (YFT). Australia will produce more capital-‐intensive goods (Yk) than its domestic demand while China will produce more labour-‐intensive goods (YL) than its domestic demand. Consumers’ utility in both countries will increase as they move from CA to CFT on indifference map.
YK#
YL#
YK#
YL#
YA=CA#
YFT#
CFT#
*(PL/PK)A#
*(PL/PK)A#
!!
CA#
YA=CA#
!!
CFT#
YFT#
China#(labor*abundant)# Australia#(capital*abundant)#
Empirical evidence supports neoclassical theories
Empirical studies have shown the growth-‐enhancing effects of trade (Sachs and Warner, 1995; Frankel and Romer, 1999).
Outward-‐oriented developing countries grow faster than inward-‐oriented ones (Dollar, 1992).
Trade also appears to be an essential component for transition economies (Nannicini
et al. 2011) and positively influences growth through investment.
However, the effects of trade openness are not immediate: in the short term the effects are negative because resources become redundant in areas of disadvantage, then their reallocation to areas of comparative advantage will lead to growth in the medium run, as incomes rise to a higher steady state level (Falvey et al. 2012).
Openness is not enough to produce growth. Trade liberalization is a means toward economic development, and a vehicle to facilitate growth, not an end in itself (UN 2013).
Do neo-‐classical trade theories apply to the recent disputes on solar panels?
• While neo-‐classical trade theories support freer trade, there are a number of issues that should not be overlooked before drawing any inferences about the recent anti-‐dumping and anti-‐subsidy measures imposed by the US and the EU.
• Neo-‐classical theories are based on stylized models.
• Solar panels should be considered as investment goods, rather than typical consumption goods.
• Consumption of solar panels is not reflected in consumer’s indifference curves. Only renewable energy generated from solar panels is reflected in the consumption bundle.
• It is controversial to assume that consumers’ utility will increase if non-‐renewable energy is replaced by renewable energy. Consumers cannot consume more under a fixed budget.
• New investment in solar energy should not be considered as absolutely ‘additional’. The costs of decommissioning active power plants and the effect of crowding out other investments should be considered thoroughly before drawing any conclusions.
Modelling framework
*see detail in appendix ,
BAEGEM: A dynamic general equilibrium model with detailed sectoral, national and government accounts
CGE models are structured on the basics of supply and demand. Each sector of the economy is linked by supply and use of factors and intermediate inputs.
CGE models account for the indust r ia l flow-‐on effects triggered by shocks in other parts of the economy and the economic feedback effects that a r e n e g l e c t e d i n m a n y government policy analyses
Database: GTAP8 database plus further disaggregation
XXX: 2025 Highest Impact:2020 Methodology: Dynamic CGE (Computable General
Equilibrium) Key features
GTAP v8 database with a base year of 2007 and covers 129 countries/regions across the world and 57 commodity groups
1
BAEGEM expands the GTAP commodity groups to 71 and was aggregated into 18 economies (US, EU27, China, Japan, Aus t r a l i a e t c*…) and 27 commodities
§ Mining (thermal coal, met coal,, oil, gas, iron ore and other minerals)
§ Agriculture (crops, livestock, fishing and forestry)
§ Solar module manufacturing
§ Manufacturing (Processed Food, chemical, iron and steel, other manufacturing)
§ Electricity, Heat
§ Land transport, water and air transport
§ Construction
§ Services
2
Dynamic multi-‐region, multi-‐sector CGE model developed by BAEconomics
Capable of simulating economic scenarios over a long time horizon. Each time step is one year
Demand for commodities in the model is determined by the social accounting matrices of the modeling regions, the prevailing economic conditions and policy settings
CGE models are structured on the basics of supply and demand. Each sector of the economy is linked by supply and use of factors and intermediate inputs.
CGE models account for the indust r ia l flow-‐on effects triggered by shocks in other parts of the economy and the economic feedback effects that a r e n e g l e c t e d i n m a n y government policy analyses
1
2
3
4
5
CGE models ensure that the most important economic identities and constraints (extremely important for simulating long-‐term scenarios):
• GDP mea s u r e d b y t h e expenditure approach and the income approach;
• Supply of capital, labour and natural resources;
• Market clearance of individual markets;
• The relationship between the current account and the capital account;
• The relationship between government expenditure and taxes;
are respected during each simulation time step.
CGE models contain detailed industry cost structure and bilateral trade information in their databases such that s u b s t i t u t i o n b e t w e e n commodities and competition between economies can be modelled explicitly
BAEGEM: A dynamic general equilibrium model with detailed sectoral, national and government accounts
• Solar panel demand • Trade • GDP • Consumers • Producers • GHG emissions • Policy implicaKons
• Trajectory of the world economy from 2014 to 2018 WITHOUT anK-‐dumping and anK-‐subsidy measures by the US and the EU
• Trajectory of the world economy from 2014 to 2018 WITH anK-‐dumping and anK-‐subsidy measures: • US (30% import duty on solar modules from China ), • EU (30% duty on solar modules from China if the 7GW quota is exceeded)
• Social • AccounKng matrices • USGS data • World Bank data • 17 Regions • 20 Sectors
Stage 5
Assessing impacts
Stage 4
Introducing alternaKve scenarios
Stage 3
Reference Case
Stage 2
AssumpKons
Stage 1
Building the CGE model
• GDP projecKons • PopulaKon projecKons • Solar panel demand (reference case) • Energy Mix (reference case)
Solar panel demand under the reference case: 2013-‐2018
Assumed installed PV system in each region (MW)
The global demand under the reference case is consistent with the recent projection by the European Photovoltaic Industry Association (EPIA 2014)
MW 2013 2014 2015 2016 2017 2018
Europe 10975 9040 9830 10210 10920 11580
Japan 6968 7500 7800 8100 8400 8700
China 11800 13000 14000 14800 15600 16400
US 4750 5700 6200 6700 7200 7700
Australia 850 850 600 850 950 1050
Rest of Asia 2015 2400 3100 3800 4500 5200
ROW 993 1200 1600 2100 2700 3400
Total 38351 39690 43130 46560 50270 54030
Results: demand for solar modules in major economies
0
5000
10000
15000
20000
2013 2014 2015 2016 2017 2018
EU27
Reference AlternaKve
MW
0
2000
4000
6000
8000
10000
12000
14000
2013 2014 2015 2016 2017 2018
US
Reference AlternaKve
MW
0
5000
10000
15000
20000
2013 2014 2015 2016 2017 2018
China
Reference AlternaKve
MW
0 200 400 600 800 1000 1200 1400
2013 2014 2015 2016 2017 2018
Australia
Reference AlternaKve
MW
Increase in demand under the alternative scenario is driven by lower prices, resulting from tariff removal and capacity expansion
Results: production of solar modules in major economies
Under the alternative scenario, production in the US is driven up by a larger domestic market despite losing market share to imported modules.
0
500
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1500
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2500
2013 2014 2015 2016 2017 2018
EU27
Reference AlternaKve
MW
0
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2013 2014 2015 2016 2017 2018
US
Reference AlternaKve
MW
0 10000 20000 30000 40000 50000 60000
2013 2014 2015 2016 2017 2018
China
Reference AlternaKve
MW
0
2000
4000
6000
8000
10000
12000
2013 2014 2015 2016 2017 2018
Rest of Asia (excluding Japan)
Reference AlternaKve
MW
Results: net export of solar modules in major economies
Taiwan, Malaysia, Korea and the Philippines are major competitors with China. Under the alternative scenario, exports from these countries will decrease while imports in India and rest of South East Asia will increase.
-‐14000 -‐12000 -‐10000 -‐8000 -‐6000 -‐4000 -‐2000
0
2013 2014 2015 2016 2017 2018
EU27
Reference AlternaKve
MW
-‐12000
-‐10000
-‐8000
-‐6000
-‐4000
-‐2000
0
2013 2014 2015 2016 2017 2018
US
Reference AlternaKve
MW
0
10000
20000
30000
40000
2013 2014 2015 2016 2017 2018
China
Reference AlternaKve
MW
0
1000
2000
3000
4000
5000
2013 2014 2015 2016 2017 2018
Rest of Asia (excluding Japan)
Reference AlternaKve
MW
Results: Reduction in global greenhouse gas emissions
Over the projection period (2014-‐2018), global emissions could be reduced by nearly 50 Mt of CO2 in additional under the alternative scenario.
0 2 4 6 8 10 12 14 16 18 20
2013 2014 2015 2016 2017 2018
Alternative
Mt CO2
Reduction in GHG emissions, relative to the reference case
Results : impacts on real GDP
-‐6000
-‐4000
-‐2000
0
2000
4000
6000
8000
10000
2013 2014 2015 2016 2017 2018
EU27 US Japan China Rest of Asia Australia
Million, 2013 USD
Assumptions: Every dollar of investment on solar energy is offset by a dollar less investment on other energy sources. Consumers are indifferent between solar energy and other form of energy (retail energy price is neutral in response to increasing supply of solar energy) All new investments on solar energy are provided by domestic investors.
Results: If new investment on solar energy is not ‘additional’ to the economy, GDP in the EU and the US under the alternative scenario is projected to fall because more than 80% of solar modules are imported. No other energy technologies would make the EU and the US so dependent on China.
Change in real GDP, relative to the reference case
Caveats
• The US’ anti-‐dumping measures on products from Taiwan are not included. Also, the details of the anti-‐dumping and anti-‐subsidy measures on individual manufacturers are not considered.
• The details of subsidy in each economy, whether they are ‘specific’ or ‘non-‐
specific’, are not considered.
• Compliance costs, investigation and legal costs are not considered. • The capability of a nation to develop innovations are not considered. • The impacts of solar energy supply on retail electricity price have not been fully
factored in (it is assumed to be neutral).
• The share of foreign investment in various energy sectors have not been factored in.
Conclusion: Arguments for anti-‐dumping and anti-‐subsidy tariffs are not convincing
• Excluding loan access from state-‐owned banks, the total amount of subsidy provided to the Chinese solar energy industry is not large. The national FIT of 0.15USD/kWh is relatively low and it has been abolished in 2014.
• Many manufacturing industries in China do not make a profit or only make little profit. Solar panel manufacturing is not the only industry as a whole not making profits. Note that China’s stock market is the worst-‐performing stock market over the past two decades while the country enjoyed the fastest growth in the world.
• GDP target, stability and employment are the major concerns of state-‐owned companies in China. For private business, access to loans and raising funds from foreign stock markets are at the top of their agenda, not profitability.
• Subsides provided to domestic industries and consumers for purchasing solar panels may provide
an incentive for low cost countries to provide ‘specific’ subsidies to their exporters if wealth transfer from importing countries is significant.
• Solar panel manufacturing is a labour-‐intensive industry. China has a comparative advantage in producing labour-‐intensive goods as factory workers cost around 1-‐2 USD/hour.
• An additional 50 million tonnes of CO2 could be abated between 2014-‐2018 if the current anti-‐dumping
and anti-‐subsidy tariffs are removed.
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