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Life Is Full Of Tradeoffs: If We Want To Do More To Fight Climate Change We May Have To Lower Tariffs On Solar Panels Which Might Put U.S. Firms Out Of Business

Summary:
One of the fundamentals of economics is opportunity cost which is the value of the best foregone alternative. We often say "there is no such thing as a free lunch." If if you want more of one thing you give up something else. This article is a good example. It does mention that we could give solar firms tax credits instead of using tariffs. But again, that still poses a tradeoff as it means more taxes would have to be collected elsewhere.See Biden’s China and Climate Goals Clash Over Solar Panels: Expiring tariffs on Chinese imports have the administration facing a trade-off between cheap renewables and solar made in the U.S. by Josh Zumbrun of The WSJ. Excerpts:"The Biden administration faces a looming decision on solar-energy tariffs that pits its goal of combating climate change

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One of the fundamentals of economics is opportunity cost which is the value of the best foregone alternative. We often say "there is no such thing as a free lunch." If if you want more of one thing you give up something else. This article is a good example. It does mention that we could give solar firms tax credits instead of using tariffs. But again, that still poses a tradeoff as it means more taxes would have to be collected elsewhere.

See Biden’s China and Climate Goals Clash Over Solar Panels: Expiring tariffs on Chinese imports have the administration facing a trade-off between cheap renewables and solar made in the U.S. by Josh Zumbrun of The WSJ. Excerpts:

"The Biden administration faces a looming decision on solar-energy tariffs that pits its goal of combating climate change against its ambition to wrestle high-tech manufacturing supply chains from China.

Early next year, U.S. taxes on imported solar panels are set to expire after a four-year run. Many climate activists and solar-energy users want the administration to scrap the tariffs, saying they make solar panels needlessly expensive."

"U.S. solar manufacturers are petitioning to extend the tariffs for another four years. They say without them, the U.S. will effectively cede the business of making solar panels to Chinese companies, which already dominate key portions of the solar supply chain."

"The Energy Department estimates that 40% of America’s electricity could be solar as soon as 2035, and the industry could “employ as many as 1.5 million people—without raising electricity prices.”

Relying entirely on tariff-free goods from China may be the cheapest option to achieve that outcome. But advocates for tariffs say that view is shortsighted, as it may make it impossible for an American solar supply chain to compete.

We have to keep the tariffs to allow the domestic industry to get further scale and further capacity,” said Michael Stumo, chief executive of the Coalition for a Prosperous America, a group of manufacturing, agricultural and union organizations"

"Solar panels are made in four steps. The raw material, polysilicon, is molded into ingots—large, rod-shaped crystals. Ingots are sliced into paper thin wafers, which are processed into solar cells. Finally the cells are assembled into the familiar modules, or panels, that wind up on roofs.

The U.S. has no significant capacity to produce wafers or cells, having seen a nascent domestic industry wiped out during the past decade.

But there are a number of American factories capable of producing polysilicon, which is also used in semiconductors, and a handful of struggling U.S. manufacturers still make solar modules.

This dynamic—where American companies can perform the first and last steps in the process, but not the middle two—leads some analysts to believe it could be possible to reconnect a wholly American supply chain."

"Critics of the tariffs aren’t convinced, noting that many industries rely on global supply chains, and that the tariffs have been in place for four years already without leading to a revival.

Total solar jobs have declined since the tariffs took effect, according to estimates from the National Solar Jobs Census, a privately funded survey. While installations have increased and costs improved, Americans often pay significantly more for solar modules than other countries without the tariffs do, said Ms. Zoco of IHS Markit.

Both supporters and critics of the tariffs support another policy option: the proposed Solar Energy Manufacturing for America Act, introduced by Sen. Jon Ossoff (D., Ga.). The bill had been included in the House-passed version of the Biden administration’s $2 trillion budget bill and would create significant tax credits throughout each step of the solar supply chain."

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