It’s hard to play nice when it comes to solar energy. That’s what the United States and India are finding out this week, though it’s a lesson that the EU and China (and, separately, the United States and China) have already learned the hard way. Yesterday, U.S. Trade Representative Michael Froman announced that America would be challenging India’s protectionist solar energy trade policies. The FT reports:
The US launched a similar challenge a year ago, but the office of the US trade representative said it had had little effect. When India launched the latest phase of its solar programme in October, it said half of the key equipment could now be imported, but it also broadened the types of technology that had to be Indian-made. […]On solar power, Mr Froman said: “[India’s] domestic content requirements discriminate against US exports by requiring solar power developers to use Indian-manufactured equipment instead of US equipment.”
Unsurprisingly, this isn’t going over well in India. Joint Secretary of New and Renewable Energy Tarun Kapoor insisted his country’s solar program was WTO compliant, and turned the issue back toward Washington, claiming that the “U.S. itself has local-sourcing norms for some government procurement.” India’s Trade Minister was a little more direct in his response, saying, “We may also have some issues with them with regard to solar. We may also have an application or may move the WTO.”There’s a broader context to this. Washington isn’t happy with its trade relationship with New Delhi, and the arrest and strip search of an Indian diplomat has strained relations between the two countries. At its core, though, this latest flare-up is a fairly simple story about the problems associated with propping up an uncompetitive technology. America and India, like China, Germany, and the EU, both want to protect their fledgling solar industries. Solar can’t compete with fossil fuels on price; it needs government support at every step in the production chain. That’s led to a complex web of global subsidies, and trade disputes like this one. Cutting support for this renewable but economically unsustainable energy source wouldn’t just bring electricity prices down, it would be a boon to global free trade.