WASHINGTON — The Obama administration talks a lot about the need to develop renewable energy around the world to curb climate change. But right now, it’s trying to kill India’s effort to boost its domestic solar industry.
The U.S. wants India to back off a policy that would require local sourcing for solar energy technology, and has sought World Trade Organization enforcement action. Representatives from the two nations reportedly met last week to try to settle the trade battle over India’s rapidly developing solar industry, but reached no resolution.
U.S. Trade Representative Michael Froman said in February that India’s rules for locally made products for its solar power program “discriminate against U.S. exports” and break WTO rules. “We are determined to stand up for U.S. workers and businesses,” he said.
The U.S. and India have 60 days from last month’s announcement of the enforcement action — until April 11 — to resolve the conflict before it goes to the WTO, which can impose sanctions. Last month, India indicated it would block WTO investigations into its trade policies, according to Reuters.
The dispute centers on the second phase of India’s solar power policy, known as the Jawaharlal Nehru National Solar Mission. PV Magazine described the rules in an article in October, noting that they require that half the solar components come from domestic sources.
The U.S. objected to domestic sourcing requirements for the first phase of India’s program, leading to WTO consultations in February 2013. Phase II, however, expands domestic sourcing requirements to include thin film solar technologies, which the U.S. exports to India.
Indian and U.S. representatives met last week, according to reports. The countries “are consulting,” said a spokesman for the USTR, who spoke on background. “We continue to prefer that our concerns be resolved bilaterally, but after we filed last year’s WTO solar dispute, India maintained and expanded the local content requirements in its national solar policy rather than seek to resolve U.S. concerns.”
Some environmental advocates have criticized U.S. representatives for challenging a policy meant to help develop India’s renewable energy. They argue that the WTO action contradicts work by the U.S. and other nations through the United Nations to reach international agreements on cutting emissions and supporting the transition to a low-carbon economy in developing countries like India.
Right now, India is “incredibly reliant on coal,” said Ilana Solomon, director of the Sierra Club’s Responsible Trade Program. “It is imperative for the people of India and our global climate that India begins to transition away from fossil fuels like coal and to renewable energy sources like solar.
“We do believe that U.S. has a right to, and should be, fostering its own manufacturing,” said Solomon. “But that doesn’t mean that the U.S. should be trying to tear down the capacity of other countries to do the same.”
The USTR spokesman argued that the effort to change India’s policy would benefit the shift to renewable energy. “The U.S. request for consultations supports the goal of rapid global deployment of renewable energy,” said the spokesman. “Local content rules not only are an unfair barrier to U.S. exports, but also raise the cost of solar energy, hindering deployment of solar energy around the world, including in India.”
The U.S. spokesman noted that other countries have taken steps to mitigate climate change “without discriminating against imports.” The spokesman added: “Countries have available a wide range of policy tools to promote increased reliance on clean energy that are far more effective than local content rules, and that do not unfairly discriminate against U.S. workers and businesses. Nothing in this dispute would stand in the way of other countries, including India, taking similar measures.”
The U.S. and China have also faced off over solar panels. In 2011, the U.S. accused China of illegally subsidizing solar technology and then “dumping” the cheaper panels in the U.S. market. The U.S. later imposed tariffs on Chinese panels. China initiated WTO consultations over the U.S. tariffs in 2012; the panel convened to examine that case is still working, according to the WTO. China also levied its own tariff on U.S.-made panels last year.
India has, so far, resisted pressure from the U.S. “We are ready to explain our position. Our arguments remain the same as those made when the U.S. had complained against the first phase,” an Indian official told The Hindu Business Linelast week.
India’s Commerce Minister Anand Sharma has defended the country’s policies. “We are also clear that India has to create domestic manufacturing capacities,” he said last month, according to The Hindu. “India must have those capacities. Otherwise, we will end up importing for the rest of our lives.”
U.S. Energy Secretary Ernest Moniz traveled to India in early March, and the solar dispute was probably discussed. Ahead of that trip, U.S. and Indian civil group leaderswho have been meeting to discuss bilateral cooperation on climate and energy sent a letter to Moniz and to Shri Montek Singh Ahluwalia, India’s deputy chairman of the planning commission, urging the two to resolve the dispute. The letter was signed by Carol Browner, a senior fellow at the Center for American Progress who previously directed the White House Office of Energy and Climate Change Policy, and the head of the Indian nonprofit Ananta Centre.
“These disputes can hinder efficient renewable energy development and investor confidence across jurisdictions. The current trade dispute between the United States and India over solar power development is highly unfortunate,” the civil leaders wrote in the letter. “We encourage the two governments to resolve the dispute quickly with an eye towards advancing renewable energy more broadly and recognizing that the wider deployment of renewable energy serves to create a global public good as a response to climate change.”
Anjali Jaiswal, director of the India Initiative at the Natural Resources Defense Council, said she remains optimistic that the two countries can “work it out.”
“India can design solar policies that encourage domestic manufacturing, while allowing other countries’ solar industries to work in India,” Jaiswal said.
India launched its solar energy mission in 2010, and is expected to have 2 gigawatts of capacity by 2015, Jaiswal said.
Jaiswal said domestic sourcing requirements have not been functioning as well as they could in increasing India’s manufacturing base, pointing to a NRDC report in 2012 on Phase 1 of the solar project. The report found that the installation and sales of solar technology will generate more jobs in India than the manufacturing of components, and that making solar parts is “not the sole, optimal route for short-term job and value creation.”
Jaiswal and a colleague suggested other ways that India could help develop its domestic manufacturing base in an op-ed on the report.
What’s really hampering India’s industry, she said, is the trade standoff.
“What we need for solar energy is confidence in the market,” said Jaiswal. “A trade dispute does not help confidence in the market. It sends a chilling effect.”