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.


  1. It is sort of like bad policy squared. Maybe it will make the whole house of cards collapse faster.

  2. The idea behind the subsidies is that they want to help the environment, but also want keep their government's investment within the country, rather than sending it to china. However, if china is subsidizing solar power manufacture, why not eliminate the domestic subsidies and eliminate the tariffs. We get the same amount of subsidies for environmentalism, but make the chinese pay for it.

  3. Hey, then they invest in solar powered companies with government money. Great use of taxpayer dollars and don't all the economic incentives align as well........harumph.

    Solyndra stock...what is it worth?

  4. Finally something i can really sink my mind into thinking about... whew

    First, lets dash away hopes as to solar as a energy source at all for quite a long while. Starting with solar panels. When they point out the energy and the ability, and so on, they never do a full accounting. For some reason, certain disciplines tend not to want to do a full accounting as to the cost from pulling materials out of earth, transporting them, making them into things, the electricity, the person costs, the support materials, the distribution method, the grouping of average units in a sale or location, the negatives and or positives in those locations, the maintenance, and finally disposal (pushing plasma recovered materials from garbage dumps being such intense collections of profitable minerals and other things, off to the distant future given our energy policies).

    When you put this all together, you will find that what a solar panel is – is a battery.

    If the energy and expense going into creating it is not exceeded by a large amount, it in effect acts like a battery; it’s the same as having that energy that went into it in some storage unit and using it at a rate equal to a sun mediated valve.

    The point though, is that politicians, as I may have said before, are doing the – lets pick marginal tech that would have a small market, and lets buy stock in it, and then put mandates and then put a subsidy on it. And THAT’s equal to putting a spigot on a maple tree (till the tree dies). This may also be directed to foreign countries as a way of paying them off. Which is what happened when we went from safe, and cheap and actually efficient tungsten, to mercury, which china has a huge amount of.

    How can tungsten be cheap and efficient? Easy… the comparison between the two systems does not include the costs of distribution of mercury throughout our society, that cant be recovered, and that causes mental issues, and has an impact over a long time, and that benefits the Chinese economically AND militarily.

  5. So, let me get this straight, first you give huge subsidies to the solar industry, when that nearly bankrupts your economy your population turns to cheap imports to help them meet your mandated demands. So then you impose a massive tax on those imports.

    And this economic policy EU style? WOW, now I know why the dollar remains fairly strong despite QE infinity. Because everyone else sucks even worse.

  6. The problem is that they kind of told people that engineers don’t maximize minimize in terms of efficiency and other things. They conflate the inefficiency of the past that was due to the level of knowledge, technology, and capital for its time, was really not efficient as a kind of belief in that engineers or companies just don’t do that.

    The truth is that this premise may be true in a planned economy, but in a semi free economy where people are allowed to do their own thing, companies cant really afford to leave a sellable point just out there for no real reason. Given that, they usually have reasons, that have to do with how a product fits in the real world.

    This is something that is not easy for most people to conceptualize. I work with phds in medicine and research and they don’t seem to get it, but funny, they get it after a long while with me as we discuss what goes into an idea, and a product. This becomes more real to them when perfectly good ideas with perfectly good and easy technology cant be made into anything that can help lots of people because the answer to the question as to how its made and leveraged, ands so on just don’t work and align with law and profit.

    IF these technologies were at all viable, they would be used. What the government wants to do is pretend its accelerating progress (while PROmoting reGRESSIVE policies for people). The problem is that this cant really be done, and even economists believe falsely that it can be done. what you get is NOT what you would have gotten if you had let it go at its own pace. They are pretending they know what will work, but its obvious it wont, as economy of scale, and other things are not knobs to twiddle. Economy of scale will not make a bad technology cheap enough to make it a good technology if its not good and able to go there anyway.

    Feminism as an example. The mass movement of women into the market as a result of ideological twiddling, is like drinking a gallon of water in 5 mins vs a gallon a day. The 5 mins gets you sick, high, and probably dead (for water), while the gallon a day is optimal. In terms of feminism, it was like an army outrunning its support, and so, the state wants to construct those structures. When letting it proceed at a certain slower rate would have had them do so naturally as it always does. The optimal speed is not the attainment of the singular condition, but the speed that brings it all along.

    Note that this method they are using does not let one determine if the technology should never be made and allow one to bail early on before lots of economical cash is wasted. After all, a cell phone in the middle ages beemed back or left by dr who, would be useless without all that other stuff and things that go with it.

  7. Well, let's see. In the USA we first subsidize corn production, then mandate its use (through ethanol) in gasoline.

    Are we ahead, or behind of Europe?

  8. Worst of all is that the comments section of the European newspapers I read are full of praise for that policy. "Finally Europe acts to save its industry". Europe is doomed...

  9. John

    This is what happens when you permit free trade.

    No trade no inconsistent tariffs; it is very simple, really.

    You fail to mention that the Chinese are subsidizing their panel mfgs, taking advantage of people who were permitting Chinese imports.

    1. Correction:
      the Chinese are subsidizing their panel mfgs, giving presents from Chinese taxpayers to ungrateful people who were permitting Chinese imports.

    2. Except that China's taxpayers are not doing such.

      Forbes, of all places, actually explained what is happening very well recently.

      There is a little branch of economics more important that macro economics: regional economics and network effects. By using subsidized mfg. China is moving massive numbers of people to its cities achieving huge surpluses due to network effects. Remember, a network is geometric, N-squared, not linear.

      These network surpluses offset any subsidy.

      Tyler Cowen covered this several weeks ago and am surprised you missed the point.

      But, let's assume your right.

      Do you think it is good foreign policy, long term, to exploit China's works in this way. I would not like to see a Glen Beck type character in China wanting there money back in 20 years.

      The damn people are about to go to war with Japan over Okinawa and some islands inhabited only by birds.

  10. I would love to be back for more such nice stuff. Keep up the good work.


    Good thing we're putting those solar tariffs on ... taxing solar imports and limiting carbon emissions results in ... cutting down trees and shifting pellets across the Atlantic ...

  12. Well worth the read. I never really thought of it as an idiocracy before. but the way you lay it out is both comical and correct.

    Thanks for the post! *stumbled*


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