There Goes the Sun

PARIS – The solar industry is in disarray, with companies closing down worldwide and the rate of solar-panel installation slowing. Now, the European Union, claiming that solar panels from China are being sold below cost, is threatening to impose anti-dumping duties. But can new trade tariffs really offer a way out of the current situation, in which everyone – Europe, China, the photovoltaic (PV) industry, and the environment – stands to lose?

In fact, the EU has already imposed a provisional duty of 11.8%, which took effect on June 6. Unless Chinese and EU officials reach an alternative agreement by August 6, the duty will rise to 47%. Such a rate would undermine further the proliferation of solar power, a key feature of strategies for enhancing energy security and reducing greenhouse-gas emissions.

The PV industry’s current predicament stems from a legacy of government subsidies and cheap credit. Until recently, Europe was encouraging the installation of solar panels by guaranteeing feed-in tariffs for the electricity generated, while China provided strong incentives to stimulate the growth of its PV industry.

As China’s PV industry grew, production of solar panels surged and prices plummeted. Given insufficient domestic demand, Chinese companies turned to Europe to absorb their excess capacity, gaining an 80% share of Europe’s PV market at the expense of their once-dominant European counterparts. This imbalance, together with the eurozone crisis, led EU governments to cut solar subsidies, which in turn caused China’s solar industry to plummet.