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China Doubles Down On Short-Sighted Solar Subsidies


Say you’ve just finished building a house out of straw, but after stepping back to admire your work, you realize it’s listing dangerously to one side, ready to collapse. Do you look at the materials you used and acknowledge that maybe you’ve made a mistake? Not if you’re China. No, if you’re China, your solution is to add more straw supports. Solar panels are the straw here, and the house is China’s energy policy.

Beijing used government subsidies to build up a domestic solar industry, which then flooded the world market with cheap but poorly made panels. Declining demand and a supply glut mean that many Chinese manufacturers are now going bankrupt. It was a bad idea to begin with—solar panels can’t compete with fossil fuels without significant government intervention, which doesn’t end well, as we’re seeing in Germany. Yet China is doubling down on the scheme, offering a new set of tax rebates to the struggling industry. The BBC reports:

According to the Xinhua report, the country’s top 10 solar panel makers have up to 100bn yuan ($16.3bn; £10bn) in debt….

Manufacturers will be refunded 50% of the value added tax from 1 October 2013 to 31 December 2015, the state-owned Xinhua news agency has reported.

Of course, this doesn’t solve the underlying issue; it just delays the worst effects of the hollow industry. China isn’t the only country subsidizing solar—every country with any stake in the panel production chain offers some kind of government support—but it is the most responsible for the wildly distorted global solar market. That it’s choosing to continue propping the whole mess up might not be surprising, but neither is it a sign of good things to come for the energy source, no matter what cheerleading greens might say.

[Broken solar panel image courtesy of Getty Images]

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