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Shining a Light on U.S.-China Clean Energy Cooperation

Shining a Light on U.S.-China Clean Energy Cooperation

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Melanie Hart explains how combining our two markets can increase demand for U.S. clean energy products and provide the higher-paying jobs that we need to restore our economy.
Melanie Hart explains how combining our two markets can increase demand for U.S. clean energy products and provide the higher-paying jobs that we need to restore our economy.

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Published by: Center for American Progress on Feb 09, 2012
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1Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
Shining a Light on U.S.-ChinaClean Energy Cooperation
New Approaches Needed to Ensure China’s Global Technology Ambitions Do Not Erode U.S. CleanEnergy Competitiveness
Melanie Hart February 2012
Introduction
Te U.S. Deparmen o Commerce nex monh isexpecedo issue a criical ruling onone o he bigges rade cases o hi he U.S.-China energy relaionship in recen years.SevenU.S. solar companiesclaim ha he Chinese governmen unairly subsidizesChinese solar panel manuacurers o enable hose companies o sell heir producs a below-marke prices and drive U.S. compeiors ou o he marke. Te seven companiessuppor subsidy and dumping peiions led by SolarWorld Indusries America Inc.agains Chinese solar impors in Ocober ha ask he Commerce Deparmen o levy riple-digi aris on solar cells and modules impored rom China.Tis case highlighs a major challenge acing U.S.-China clean energy relaionships more broadly: how o handle he Chinese governmen’s deploymen o massive resourcesoward developingrenewable energy echnologies, many o which are designed orexpor. Indeed, his is an issue ha bedevils U.S.-Chinarade relaionsno jus in cleanenergy, bu also in oher indusrial and services secors, which means ha how his com-plain by U.S. solar manuacurers plays ou may well have much broader implicaions.One o he bigges challenges acing renewable energy in he Unied Saes is ha radi-ional ossil uels are cheaper here han hey are in almos any oher developed counry.Tis is primarily due o he large supply o ossil uels such as coal and naural gas in ournaion, as well as a long hisory o ederalgovernmen subsidiesor developing hoseenergy sources. Te Unied Saes has also ailed o pu a carbon price on ossil uels, soU.S. ossil-uel prices do no include he environmenal and public-healh damage romgreenhouse-gas polluion. Relaively low ossil-uel prices make i paricularly hard orrenewable energy o compee agains convenional energy in he U.S. marke.
 
2Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
Noneheless, over he pas decade U.S. companies have goten much beter a manuac-uring, deploying, and operaing renewable energy echnologies, and as a resul pricesarecoming downrapidly. As prices decrease renewable energy gains marke share andspeeds our ransiion oward a more susainable energy economy.Te problem is China isparicularly gooda making hings cheaply. A helower endo  he value chain, ha is primarily due o he counrys low labor coss and massive supply chains. Also advanageous are China’s lax labor, saey, healh, and environmenal san-dards. A he higher end, ha is oen because he Chinese governmen provides gener-oussubsidiesand oher orms o suppor or high-echnology research, developmen,and commercializaion. Low-cos Chinese manuacuring plays a large role in drivingprices down or a wide range o producs, including renewable energy echnologies.Chinese manuacuring also plays a large role in pricing some U.S. manuacurers ouo business, wih many o hosemanuacurersclaiming ha he “China price” is driven by Chinese governmen inervenion raher han naural marke orces. I he Chinesegovernmen is inervening in a way ha breaks rade rules hen ha ype o rule break-ing should be remedied in some way.Deermining wheher China is playing by he rules requires aking a close look a heirrenewable energy policies—no only a he naional level bu also a he provincial andlocal levels. Tose policies are oen dicul o parse because China’s economic sys-em is no like ha o he Unied Saes. I is a nonmarke economy wih a op-down,command-and-conrol energy planning process ha is oen nonransparen wih evenmore opaque ineracions beween he cenral governmen in Beijing and he provincialand local governmens when hese policies are implemened. All his makes i very di-cul o gure ou wheher he counry is abiding by inernaional rade rules.Te Unied Saes hasmuch o gainrom cooperaing wih China on clean energy. As he world’s ases- and larges-growing energy marke, China is an ideal esing ground or scal-ing up and commercializing clean energy echnologies. Combining our wo energy markesincreases economies o scale o bring down coss or consumers in boh counries.Bu he China we aredealing wih oday is no he same China we were dealing wih 10 years ago. We are accusomed o China ocusing on low-end manuacuring and usingheir cos advanages o make U.S.-designed consumer elecronics and oher low-endproducs cheaper and aser. Now China is moving up he value chain o higher-endechnology. Tey are aiming o compee wih us in highly engineered, capial-inensiveindusries such as solar phoovolaic, or PV, sysems, where he Unied Saes has longenjoyed a comparaive advanage.In shor, insead o serving as he low-cos workshop or U.S. companies, China is aimingo capure he pars o he produc and services value chain ha we are used o dominaing.
 
3Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
Te Unied Saes should no shrink rom ha challenge. Our rms are generaing he bes high-end echnologies in he world, and we have a skilled workorceha is hardo bea. A rising China is no a reason or us o close o our clean energy markes andorei he benes we can ge rom bilaeral rade and oher orms o collaboraion. Tisrelaionship is only a win-win, however, i we compee wih he Chinese on a level play-ing eld, which is proving o be he bigges challenge.Ensuring ha he Chinese play by he rules will require more policy coordinaion onhese ypes o bilaeral rade dispues here in he Unied Saes. Te Obama adminisra-ion’s new radeenorcemen iniiaiveis a criical sep in ha direcion. Bu i is only ars sep. Tis issue brie will give an overview o he curren solar PV rade dispue ohighligh he larger challenges we ace.Chinas energy economy is a massive command-and-conrol juggernau, and our energy companies are oen orced o choose beween leting a variey o rade problems slide versus squaring o agains ha sysem on heir own. Ensuring he U.S. governmen rec-ognizes and addresses ha imbalance a he ederal level vis-à-vis China will be criicalor keeping he U.S.-China clean energy parnership moving in a posiive direcion.Te Unied Saes will also have o do a beter job coordinaing rade enorcemen ahe inernaional level becausemulilaeral pressureis increasingly needed o make heChinese governmen adhere o global norms and rules. Since China’s rade policies arealso harming clean energy exporers in many oher counries—paricularly inEuropehe Unied Saes should have pleny o parners o work wih.
 The global solar PV market and China’s manufacturing rise
Te curren rade case ocuses on crysalline siliconphoovolaiccells and modules, which conver sunligh ino elecrical energy. Te demand or hese PV solar cells andmodules is driven by he demand or solar panel insallaions. Solar echnology hasexpanded rapidly in recen years due o he increasing ineres in low-emissions ech-nology and he declining coss o solar cells. Since i is a newer echnology, however, iis sill generally more expensive o deploy han naural gas or coal, a leas in he shorerm. Mos counries already have exensive inrasrucure o suppor coal, bu solarinrasrucure is sill underdeveloped so solar prices have o include inrasrucure devel-opmen and capial coss. Due o hose addiional coss, he price dierenial or solarpanels over he pas decade has been driven primarily by governmen subsidies o boosdeploymen o solar energy.In Europe many o hose subsidies are in he orm o a “eed-in ari  ,” which requiresuiliies o purchase solar energy a prices ha are higher han wha he uiliy is pay-ing or convenional ossil energy. Germany launched he rs major naionwide solar

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