The U.S. solar industry is nervously awaiting President Donald Trump's decision whether to impose punitive duties on imported solar panels and related equipment or even restrict some of those imports altogether. It could come any day between now and late January.
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This is the final stage of a process that began when two U.S. subsidiaries of foreign solar panel makers filed a rarely used kind of trade complaint with the International Trade Commission. The independent U.S. agency has recommended a course of action officially intended to protect domestic manufacturers from unfair competition.
But far from protecting U.S. interests, the tariffs would stifle the current solar boom, destroying American jobs and dragging down clean energy innovation. As economists who research climate and energy policies that can foster a greener North American economy, we argue the government should instead create targeted subsidies that support innovation and lower costs across the supply chain. This approach would do a better job of helping the U.S. industry fend off foreign competition without harming the industry itself.
A booming industry
The U.S. solar industry has enjoyed unprecedented growth in recent years, thanks to the rapidly declining cost to install solar systems and tax breaks for homeowners, businesses and utilities that have expanded demand but are being phased out. Prices have plunged to roughly US$1.50 per watt from around $6 in 2010 due to both innovation that made it less expensive to make panels anywhere and cheap imports.
In 2016, 87 percent of U.S. solar installations used foreign-produced panels, also known as modules, primarily from China.
The rapid decline in solar panel costs has been driven by policies in China and elsewhere intended to expand domestic manufacturing of these products.
The problem is not unique. Other countries dependent on cheap solar imports, including Germany and Canada, are also grappling with how to sustain the solar boom while protecting their own domestic manufacturers from unfair foreign competition.
