Thursday, September 21, 2017

Duet Redux

Another duet of headlines with an interesting lesson, both from the Wall Street Journal:

Solar power death wish
Suniva Inc., a bankrupt solar-panel maker, and German-owned SolarWorld Americas have petitioned the U.S. International Trade Commission (ITC) to impose tariffs on foreign-made crystalline silicon photovoltaic cells. 
Solar cells in the U.S. sell for around 27 cents a watt. The petitioners want to add a new duty of 40 cents a watt. They also want a floor price for imported panels of 78 cents a watt versus the market price of 37 cents. 
they’re resorting to Section 201 of the Trade Act of 1974 because they don’t need to show they are victims of dumping or foreign government subsidies. They only need to show that imports have harmed them
California Democrats Target Tesla
The United Automobile Workers are struggling for a presence in Tesla’s Fremont plant, and organized labor has called in a political favor. 
Since 2010 California has offered a $2,500 rebate to encourage consumers to buy electric vehicles. But last week, at unions’ behest, Democrats introduced an amendment to cap-and-trade spending legislation that would require participating manufacturers to get a sign-off from the state labor secretary verifying that they are “fair and responsible in their treatment of workers.” 
The legislation, which passed Friday, is a direct shot at Tesla. The Clean Vehicle Rebate Project has amounted to a $82.5 million subsidy for the company
Both moves ought to pose a liberal conundrum. If you want carbon reduction, you want cheap solar cells, so that more people will buy them. The planet does not care where the solar cells are produced. If you want electric cars, you want cheap electric cars so that more people will buy them.

But those who falsely sold green energy as a job producer, a boon to the economy; not a costly alternative to fossil fuels, a cost that must be borne to save the planet, now face this conundrum.

The deeper lesson here is the corrosive nature of subsidies and protection. Once the government starts subsidizing solar cells and electric cars, there is a quite natural force demanding access to the subsidies. Why should the owners of the Tesla company get largesse from the taxpayers, and not their workers too?

Solar cells are just the latest embodiment of the infant industry fallacy -- that protection from competition will allow an industry to grow and become competitive.  Instead, they become infantile industries, expert and getting protections and subsidies not producing cheap solar cells.

The infrastructure paradox is similar. We need infrastructure. Yet federal contracting requirements, requirements for union workers and union wages, and everything else attracted to federal money being handed out, drive costs up to astronomical levels.

For energy, this is an abject lesson in the wisdom of a simple carbon (and methane) tax in place of all the subsidies and winner-and-loser-picking our government does. (Let's not fight about whether to do it. The point is if we want to restrict fossil fuels and subsidize a move to non-carbon energy, this is how to do it.) Subsidies and protection invite demands for subsidies and protection, not clean energy.


  1. I think this is the best thing I have read on the cost trend of solar power:

    It seems to me that as exchange rates adjust one consequence of China exporting more of a subsidized product like solar panels (or aluminum or steel) is that they will export less of other things. Similarly, as the United States subsidizes agricultural exports it will negatively impact manufacturing production in the United States through trade effects.

    As to the United Auto Workers: you would have thought they would have been content with (and learned from) the damage they have done to Detroit.

  2. I agree if one has already decided to subsidize alternative fuels. The alternative is to let the markets decide. The previous administration demonstrated that once you open the door to subsidies you have all kinds of favoritism and patronage (I like to call this "corruption") which the carbon tax avoids.

    I believe the additional comment "and methane" is not necessary since it IS carbon based and contributes to CO2 emissions according to its chemical stoichiometry. From EIA, pounds of CO2 emissions per million British thermal units (Btu) of energy:

    Coal (anthracite) 228.6
    Coal (bituminous) 205.7
    Diesel fuel & heating oil 161.3
    Gasoline (without ethanol) 157.2
    Propane 139.0
    Natural gas (primarily methane w/ small amounts of ethane etc.) 117.0

    Danley Wolfe, XP54 ('85)

    1. Two reasons why mentioning methane is appropriate.
      1. In the first several years methane has 20 times the climate effect that CO2 has.
      2. Escaped methane does end up as CO2 but does nothing useful on the way.

  3. This is just one of many liberal conundrums. At a gathering in SF, I met two software engineers from Canada and France extolling the virtues of their generous welfare states. I then asked what made them come here. They both scoffed...Do I realize how hard it is to get a job there and how little it pays?

    1. Getting a particular kind of job (and pay) in Europe, for instance, is not simply a matter of welfare state or not. Tech business has thrived on the ability of people to move so that the whole world's supply of, e.g. disk-drive engineers, is attracted to and concentrated in a few (or one) localities. It would be just as reasonable for you to assert that they took their jobs in California in spite of, rather than because of, the lack of a national health service.

  4. "Both moves ought to pose a liberal conundrum."

    What makes this a `liberal` problem? I suppose 'conservatives' have no conundrum because they want neither lower carbon or cheaper solar cells?

    1. Because from my observation, liberals tend to take the moral and simplistic high ground with all their arguments.

      Think welfare is a mess... what, you think poor people should starve to death???

      Think healthcare and education are bloated beauracratic messes.... What, you clearly don't care if the uneducated poor die in the gutter.

      Disagree about the right climate change are clearly a shill for the Koch brothers.

      Etc etc

    2. It seems to be a math problem, or perhaps a simple incentives problem, it is not a problem for any kind of liberal values though. You can subsidize green energy and want unions to be fairly represented at the same time. Further, characterizing green energy lobbying as part of a liberal dilemma seems wrong. Alert the presses, industry advocates for market imbalance in its favor; that's not a liberal thing any more than it's a conservative thing.

    3. CO2 is good for the planet. It increases the productivity of the vegetation system, and makes the world warmer, healthier, and happier. Why wouldn't I want to see more of it?

      Solar cells are useless trinkets. It is not possible to power an industrial society with solar cells, because the sun sets every #$%&@#ing day. Why should I want them to be cheaper. Cheap useless junk is just as useless as expensive useless junk.

    4. Do not paint conservatives with a broad brush. It is possible to be a conservative and desire lower carbon and cheaper solar cells. The solutions are where left and right part ways. The majority of Americans are centerists and want solutions that make sense; not solutions that pander to political positions.

    5. I wish to avoid "unknown"'s admonition. Therefore I say that "liberal" is a strawman invented by those who *claim* to be conservative.
      Also I say that Fat Man's every sentence is plain wrong. CO2 is *part* of the planet. Vegetation is adapted to absorbing it from a small percentage of the atmosphere. Productivity is zero when CO2 is absent but not increased by supplying more than normal. And most fossil-burning CO2 ends up in the ocean much quicker than the ocean can recycle it by forming limestone. The consequences in the ocean are still to come. Look up acidification. It kills off limestone forming organisms.
      Several methods of electricity storage exist. More are on the way. China will have no difficulty building those to match PV supply/demand mismatches.

  5. Lots to take issue with in this post, starting with (1) the source. The Wall Street Journal editorial page is up there with Fox (dunno an analogue on the left) for inaccurate factual reporting. It's likely that a web search would reveal that the facts given are not exactly correct.

    (2) You argue that protectionism doesn't help beginning industries. On the other hand, Stiglitz (Globalization and ... ) argues, with lots of empirical support, that protectionism helps developing countries. Are developing industries different?

    (3) The WSJ, or your excerpt from it, ignored the argument given for tariffs -- that China subsidizes it's solar cell makers for the purpose of destroying the competition. If this is true (dunno), there is an argument that real competition drives technology better and ultimately makes the product cheaper.

    (4) ...

  6. No conundrum in letting the Chinese pay for the learning curve in solar and accepting subsidized panels in the meantime. If there is money to be made in solar panels in 20 years there will be an American manufacturer.

    Better from the American point of view that the Chinese pour money into subsidizing the production of solar panels (or into building white elephant infrastructure in Pakistan) than that they pour more money into designing jet engines and aircraft.

  7. Any industry that is dominated by China manufacturing is way beyond infancy.
    Asking for US government protection is simply whining by infantile businessmen.

  8. John,

    "For energy, this is an abject lesson in the wisdom of a simple carbon (and methane) tax in place of all the subsidies and winner-and-loser-picking our government does."

    Dumb analysis. So the federal government levies a tax on carbon (and now methane)? And they spend the money on what?

    You act as if employees in the federal government aren't like everyone else - putting gasoline in their cars, riding around in airplanes, fueling their residences, etc.

    The only thing a carbon tax does is create a privileged group of consumers. Who taxes the federal government for it's carbon footprint?

    Oh wait a minute, the federal government makes better spending decisions than you or I do - no?

    "Subsidies and protection invite demands for subsidies and protection, not clean energy."

    And taxes invite the demand for more taxes not clean energy.

    I mean seriously. From your paragraph above:

    "Suniva Inc., a bankrupt solar-panel maker, and German-owned SolarWorld Americas have petitioned the U.S. International Trade Commission (ITC) to impose tariffs on foreign-made crystalline silicon photovoltaic cells."

    So if the U. S. imposes a tariff (tax) on foreign-made crystalline silicon photovoltaic cells, this is a subsidy frowned upon in the econo-world, but if the U. S. imposes a tax (tariff) on oil (or natural gas or coal) this is no longer a subsidy and happy smiles radiate from econo-world?


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