The Few Over the Many: US Safeguard Measures on Solar Energy Products Hurts Us All
Imagine you are asked to weigh in on a situation. If you rule one way, a handful of people benefit in the short term, while millions could be harmed in the long run and vice-versa. What do you do?
The World Trade Organization recently ruled on a similar situation in the United States – Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products when it allowed the US to keep measures in place that will have detrimental effects on the global effort to fight climate change.
For context, in early 2018 the US imposed safeguard measures on imports of certain crystalline silicon photovoltaic cells (“CSPV”). Safeguard measures are temporary measures intended to protect troubled industries harmed by unexpected surges in foreign imports that slow down production or cause prices to plummet. In this case, the measures include a 2.5GW tariff-rate quota on imports of solar cells and ad valorem duties on imports of modules. As one of the largest producers of imported cells, this did not sit well with China, and they asked for a WTO panel to rule on the issue.
In September 2021, the Panel rejected China’s claims and decided that the measures were consistent with Article XIX of the 1992 General Agreement on Tariffs and Trade and the Agreement on Safeguards. The panel rejected China’s claims for three main reasons. First, China did not establish that the impugned measures failed to comply with the requirement in GATT Article XIX:1(a) that imports increased “as a result of unforeseen developments and of the effect of the obligations incurred.” Second, China failed to establish that the United States acted inconsistently with Articles 2.1, 3.1, and 4.2(b) of the Agreement on Safeguards by failing to demonstrate the required casual link between the increased imports and the serious injury found to exist. Third, China did not establish that the United States failed to ensure that other factors did not cause the injury.
So, who are the winners and the losers from this decision? Certainly, domestic CSPV producers stand to win. The measures slow down the quantity of international, especially Chinese, CSPV products entering the US market, which increases the price of solar panels. The four-year limit on the safeguards ensures that domestic industry will have what scholars call “breathing space” to restructure and increase competitiveness.
By contrast, the list of losers is much longer.
First on the list is domestic solar panel project developers. The safeguards reduce the number of available products, cause delays and raise prices. Assuming increased price leads to less consumption, this will drive down business for developers and may even lead to layoffs.
Second, consumers wishing to reduce their carbon footprint by installing solar-energy projects in their homes or businesses will suffer from increased costs and installation delays due to limited supply.
Yet the biggest loser is anyone worried about having a habitable planet after 2050. As discussed, this WTO decision will increase costs, limit supply, cause delays and increase market uncertainty which will result in fewer people investing in solar energy projects. Applied to a macro scale, this decision has the potential to slow down the US’s transition away from carbon-intensive energy.
But why should Canadians care? Answer: the sheer size of US GHG emissions makes this a global problem. For example, according to the UN Environment Programme, the US is the second-largest producer of total GHG emissions and the largest per-capita producer. According to the US Environment Protection Agency, in 2019, electricity production accounted for 25% of the US’s GHGs, and over 60% of production comes from coal, fossil fuels or natural gas. The Solar Energy Industry Association estimates that “annual installs will need to grow from less than 20 GW in 2020 to more than 80 GW by 2030 to achieve a 100% clean energy electricity grid. Consequently, because the global share of US GHGs is so large, and the transition to a carbon-neutral electric grid is still years away, this Panel decision will slow down the global effort to address climate change.
While the implications of this decision may be distressing to some, there is comfort in the fact that safeguards are only allowed to be implemented for a short period and that the US CSPV measures were only scheduled to last four years. Another source of comfort is that China is appealing the Panel decision and there is still a chance the Appellate Body might rule in their favor.
However, such comfort may be displaced by renewed distress as the US is currently considering imposing anti-dumping measures on CSPV imports from Thailand, Malaysia and Vietnam. The SEIA estimates that this would affect half of the total solar panel supply in the US and could slash solar rollout by a third over the next two years. Again, domestic solar panel producers stand to win from such a policy, but anyone interested in this GHG-behemoth transitioning to a clean-energy grid stands to lose.
Ultimately, in the fight against climate change, there are no borders that can impose safety measures while humankind sorts itself out. Instead, it is up to citizens to voice our concerns with decisions and policies that benefit the few over the present, and future, many.