The Solar Tariff’s Impact on the SDGs

By January 24, 2018Innovation, Policy, SDG
On Monday, January 22, the White House announced that they have enacted tariffs in response to US solar manufacturers relief requests. If you’re not familiar with tariffs, they are essentially an additional tax on either imports or exports. They were very popular throughout much of US history but slowly faded away as globalization and open-access markets became the standard for international trade. The new tariffs were imposed specifically for solar cells and modules, as well as washing machine parts. In this article, we will focus on the impact the tariffs will have on the solar sector and the ability of the private and third sectors to continue fulfilling the sustainable development goals (SDG). Afterward, we will discuss some other routes that the US-based sustainability community can take toward achieving renewable energy goals.

Solar Tariffs Overview

The solar tariffs that were approved by President Trump are are gradual and decline over a four year period. Year one will see a 30% tariff imposed on any imports of crystalline-silicon solar cells and modules. Following year one, there will be a 5% annual decrease until the final tariffs reach 15% in year four. In the fact sheet produced by the United Stated Trade Representative (USTR), they have presented their reasoning for recommending these tariffs to the President. The 201 Trade Case was first opened on May 17, 2017 by petitioners Suniva and SolarWorld, two PV manufacturers who were not doing too well and placed blame on subsidized solar imports from China. The USTR seemed to agree with this in their Fact Sheet, stating “The ITC determined that increased solar cell and module imports are a substantial cause of serious injury to the domestic industry.”

Context

The 201 Trade Case comes up at a critical moment in US economic history, as there is currently a sentiment of economic protectionism that advocates policies that incubate the production of goods in the US. This is usually accomplished by closing off markets or artificially inflating the price of imported goods. Imposing tariffs is a practice that has not been advocated for in quite some time, and the US is now facing criticism for jeopardizing international trade regulation as a result of these tariffs. The last trade case that was opened and had a tariff imposed as a result was in 2002 for the imports of steel; this was withdrawn one year later. Given the current protectionist climate, global stakeholders are concerned that more tariffs may come for other goods as well.

The imposition of a tariff on solar imports has divided the solar industry. There will no doubt be financial benefits for Suniva and SolarWorld as a result of this tariff; however, consumers, installers, developers, and tech companies have been upset over the recent news. In a September letter to the U.S. International Trade Commission (ITC), the Advanced Energy Buyers Group, a business led coalition, has stated:

“By reversing the downward price trend for solar energy, excessive tariffs on imported solar panels would create significant challenges as we seek to follow through on our renewable energy commitments.” they then continued “As consumers of solar energy, we are also concerned by potential adverse impacts on the U.S. solar industry as a result of undue import relief. Reduced demand from customers, including our companies, due to increased prices risks disrupting the current trajectory of the solar industry at a time when solar energy is at or approaching grid parity in many parts of the country and when the solar industry is a significant source of growth in our economy.”

While roughly 95 percent of solar products are imported, more than 50 percent of those imports actually come from South Korea and Malaysia, and they will be hit the hardest. U.S. manufacturers have been impacted the hardest by the rapid growth of open trade and globalization. For buyers though, this period of low-priced solar products has been a boon, which was trending to make solar prices competitive with fossil fuel generated energy. As a result of these tariffs, the future scenarios for the solar industry has changed, and this has wider implications for U.S. municipalities in regards to meeting the Sustainable Development Goals (SDG).

Solar Industry Impact

GTM research has recently adjusted their forecast of the impact the tariff will have on the solar industry. According to their analysis, the industry will see an 11% reduction in net solar installations, which equates to a 7.6 gigawatt reduction in potential PV capacity. Additionally, according to the Solar Energy Industries Association (SEIA) there is also an expected loss of roughly 23,000 jobs in 2018 alone as a result of this tariff, with each consecutive year increasing losses by tens of thousands. The SEIA also predicts that there will be a series of contracts that are canceled across the industry that are worth billions of dollars. Thankfully, the SEIA does not expect this decision to be a defeating blow to the solar industry. Global stakeholders are expected to launch a complaint with the World Trade Organization, as was done in 2003 for the steel tariff, which was repealed as a result.

Impact on the SDGs

The solar tariff creates a set of new challenges for every sector to meet the sustainable development goals (SDGs). In particular, the challenges are most prominent in Goal 7 (Clean Energy), Goal 9 (Infrastructure), Goal 11 (Sustainable Cities), and especially Goal 13 (Climate Change). The SDGs are quickly being integrated into reporting for organizations in both the private and public sectors. Many are working hard to help achieve them by 2030.

For Goal 7, one of the aims is to substantially increase the share of renewable energy in a country’s energy portfolio. Additionally, infrastructure is supposed to be modernized and have renewable energy sources integrated throughout. Solar energy was one of the most price-competitive renewable options cities and organizations had access to. Many long-term development projects were relying on the forecast of continuous price reductions for solar. Private organizations reasonably always seek to reduce costs where they can; this increase in solar pricing will likely make it tough for private organization to continue to purchase solar energy. The impact on Goal 7 and Goal 9 will be significant, at least for the next four years.

Goal 11 and Goal 13 are the two major ones that will not be felt as immediately as the other two. Local governments are already operating with very little and cannot afford such a price increase for solar. Plans will likely be revised and contracts with installers canceled as a result of the tariffs. The cheap access to fossil fuel energy will likely increase the purchasing of natural gas and coal. However, coal and natural gas will still struggle to achieve profitability, even within the next four years, according to reports. The solar tariff will not do much to change the economic and environmental conditions that continue to make fossil fuels a bad investment.

Areas of Opportunity

The United States will likely have more policies levied against renewable energy. Thankfully, there are still areas of opportunity that can be pursued while the policy blows are coming, two of which include sustainable-oriented innovation and energy efficiency.

Sustainability Oriented Innovation

Innovation has been an ongoing challenge for organizations, but sustainability-oriented innovation (SOI) is another beast altogether. The core of SOI is to develop products, services, and systems that contribute to a healthy bottom line and positive social and environmental outcomes. Too often, business and government have seen this as a trade-off, but research has demonstrated that impact and profit can work very well together.

In the context of the solar tariff, while prices may rise for solar energy temporarily, perhaps there are gains to be made in other renewable energy sources, depending on local conditions. Additionally, some researchers and manufacturers have begun to ask the question “is there an alternative to crystalline-silicon based solar energy?” Such a question could lead to a world of new technologies that could position the U.S. as a lead innovator in the space of renewable energy. Innovation is not simply a question of technology, but also of processes, policies, and even business models themselves. This is certainly not the time to continue seeing the rising solar prices and sustainable development goals as simply another trade-off; now is the time to develop innovative approaches for moving forward toward a more sustainable future.

Energy Efficiency

The other area of opportunity is in energy efficiency, and part of Goal 7 is not just the use of renewable energy sources but also an increase in energy efficiency gains. The reason for this is that energy efficiency reduces the load required to power industry and cities. While the transition toward renewable energy is being supported and heavily invested in by companies in the U.S., there is also some concern that not enough is being done to develop energy-efficient retrofits for buildings and fossil fuel based processes. A new report published by IRENA has claimed that renewable energy combined with energy efficiency can help move the world toward preventing global temperatures from rising 2° C  above pre-industrial levels. Additionally, the report states that energy efficiency can help move countries toward achieving dramatic Co2 emission reductions much faster than renewable energy can alone. The synergy is there for energy efficiency and renewable energy. It is just a matter of getting more companies and cities to integrate energy efficiency plans and innovations into their energy mix. While solar energy prices have increased, cities and companies can work to increase energy efficiency.

There is Hope

While these solar tariffs can seem daunting, there is much more that can be done to maintain the march toward a sustainable future. Solar is just one of many renewable energy technologies, and it has not even reached its full potential. Paired with new innovations and energy efficiency adoptions, the U.S. will still be able to participate in ensuring a more sustainable world for future generations.

Joshua Morales

Author Joshua Morales

Joshua Morales is a U.S. based sustainability expert and President at Isla Innovations. He enjoys writing about policy developments, technology, and economics. You can find him on Twitter at @SDG_Joshua.

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