Thursday, May 9, 2013

Solar Panel Tariffs

It's time to start a new series on "energy idiocy." You just can't make this stuff up... From today's WSJ:
BRUSSELS—Chinese solar-panel manufacturers will face import tariffs of up to 67.9% at European Union borders under a plan from the 27-nation bloc's executive body...
Europe, like the US, subsidizes the installation of solar panels. So, we subsidize things to make the prices to consumers go down and encourage the industry. Then when the industry is encouraged and prices do go down, we pass tariffs to make prices go up.  This is almost as fun as oil, which we subsidize to make prices go down, then pass regulations to try to stop people from using it.

The US doesn't get to indulge in any Europe bashing here,
The U.S. has already placed tariffs on solar-panel imports from China.
We also subsidize ethanol, but only from midwestern corn. We have tariffs against ethanol from Brazilian sugar cane, which is a whole lot better environmentally (is a lot less closer to using 1 btu of petroleum to produce 1 btu of ethanol, wash away topsoil and fertilizers down the Mississippi, drive up corn prices)* but seems not to show up at the Iowa caucuses.

Of course it was a bit of a miracle that prices came down in the first place. Usually,  subsidizing and protecting an industry in the idea that just making it bigger makes it cheaper leads to large inefficient industries. The correlation between big and cheap comes from competition. Hence revealing that it was the Chinese who figured out how to exploit European subsidies and actually make panels cheaper.

If you have any remaining thought that concern for the environment motivates any of this mania, reading between the lines of the rest of the story will put that to rest:
Suntech Power Holdings ..and its subsidiaries will face tariffs of 48.6%, according to the document. Tariffs on LDK Solar ... will be 55.9%, and tariffs on Trina Solar Ltd.... will be 51.5%. JingAo Solar Co. will face tariffs of 58.7%..

Most other Chinese companies in the sector that cooperated with the investigation will pay the average tariff of 47.6%. Those that didn't will pay a tariff of 67.9%, according to the document.
The tariffs vary specifically company by company, and reward those that played along politically.
...European manufacturers have filed a separate complaint against the Chinese firms alleging they receive Chinese-government support
They are shocked, shocked to find that subsidies and bailouts are occurring in the Chinese solar panel industry.
European import duties would deal a blow to these (Chinese) manufacturers, which have been piling up losses and struggling to refinance huge debts. 
In March, Suntech sought bankruptcy protection in China, after defaulting on a $541 million bond repayment it owed mainly to Western investors.
Western investors, who appaarently are not as well connected as the western investors in European solar panel plants.
LDK and Trina are both facing large debt repayments. LDK's hometown of Xinyu, China, bailed out the company in 2012, agreeing to repay $80 million of its debts.
Here in the land of free markets, we never bail out large politically connected solar panel plants....

If we want to subsidize solar panel production (debateable, but "if") for environmental reasons, and if China decides to tax their citizens to provide the subsidies rather than us tax our citizens, the appropriate response is flowers, chocolates, and a nice thank-you card.

Update: Donald Boudreaux at Cafe Hayek did a much better job.

*Update: A reader catches me with possibly out-of-date facts. I'll leave his comment here and postpone getting in to a sidetrack about corn ethanol. I'll look in to it, as it seems a good topic for another "energy idiocy" post at some point.
The tariffs on Brazilian ethanol were removed back in 2011. In fact, because of the misinformation around environmental impacts of corn ethanol, California imports Brazilian cane ethanol in remarkable quantities (and at remarkable expense, compared to Midwestern corn ethanol). We also repealed the VEETC at the same time we eliminated the tariff, which is what I assume you’re referencing in your comment about subsidization of corn ethanol. There are still incentives for some ethanol feedstocks, but corn is explicity excluded.

The information about the energy consumed to produce ethanol is also considerably out of date.... And the stuff around environmental impacts is very much in dispute—but life-cycle “science” is so lacking in data one is usually left trying to prove a negative when defending the issue

I won’t dispute Gulf of Mexico hypoxia, but there’s remarkable progress being made with agricultural production today. We still need to get homeowners to stop fertilizing their lawns at a rate 4-8X what farmers use in cornfields if we’re going to stop it, but at least the corn farmers are cleaning up their act.