No, the WTO did not just kill India’s solar industry

Green group anger at trade ruling is an exaggeration and ignores other failures of India’s clean energy plans

(credit: Pixabay)

(credit: Pixabay)

By Ed King

A ruling by the World Trade Organisation that India’s flagship solar plan illegally favours domestic over international suppliers has sparked just a little controversy.

“The WTO Just Ruled Against India’s Booming Solar Program,” boomed the Sierra Club’s Ben Peachy in the Huffington Post.

“WTO swats down India’s massive solar initiative,” grinched Grist, a story tweeted by the magisterial Naomi Klein with the comment ‘Business as F-ing usual’.

“WTO rules against renewable energy and jobs in India,” blasted Sam Cossar-Gilbert from Friends of the Earth, the charity’s ‘International Economic Justice Resisting Neo-Liberalism Coordinator’.

Coming months after the Paris agreement was signed, this seems an odd and ill-timed decision at best. But it’s not as simple as green groups are making out.

To be clear: The WTO has not ruled against India’s solar industry. What it does say is that a domestic content requirement (DRC) imposed by the government for new installations goes against its competition laws.

The DRC was a tiny part of India’s plans to build 100 gigawatts of new capacity by 2022: a pitiful 5,000MW each for land-based and rooftop projects which the government helped subsidise.

And the decision will not affect India’s wider plans, Tarun Kapoor from India’s ministry of renewable energy told the PV Tech website.

“It’s important to understand what was at stake was not climate change,” says Ilaria Espa, a senior research fellow at the World Trade Institute in Bern.

“This is not a value judgement. What was isolated in this was an industrial policy instrument.”

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For Espa and an Indian energy analyst who wished to remain anonymous, the decision was not a surprise. The WTO had hinted it would deliver this verdict in an August 2015 communication.

“The main argument [at the WTO] is climate change is a global problem and you should tackle it with non-discriminatory trade measures,” said Espa.

“If you want to boost your share of solar you can do that… but you don’t necessarily need to have them produced domestically.”

US president Barack Obama and India prime minister Narendra Modi were all smiles and hugs at the Paris climate summit last December, agreeing to cooperate on a new global solar alliance headquartered in Delhi.

Yet beneath the surface the solar dispute has been bubbling since 2014, a symptom of US frustration at India’s unwillingness to open up its market to foreign investors.

In January 2015 the two leaders released a joint climate statement, where Obama’s position was clear.

“President Obama welcomed India’s ambitious solar energy goals and encouraged India to continue its efforts to increase trade and private investment in this sector,” it reads.

“President Obama conveyed the potential availability of U.S. Government official financing in this area, consistent with its policies, to support private sector involvement for those entities in contributing to India’s clean energy requirements.”

Wider anger at the decision has to be understood in the wider context of India’s solar industry and the WTO’s reputation.

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India’s domestic manufacturers have long complained that cheap imported solar cells account for around 90% of the market, and are being “dumped” at below production cost prices.

Over 70% of the 150 million imported panels came from China in 2014. The government does not impose duties on these imports despite pleas from local manufacturers.

According to a September 2015 report by PV-Tech, India’s solar panel manufacturing capacity is around 250 MW.

A KPMG report from January 2015 suggests the sector is uncompetitive for three reasons. Small factory sizes, a lack of government support and an undeveloped domestic supply chain.

“Solar power is a strategic need for the country as solar power can potentially save US $20 billion in fossil fuel imports annually by 2030 and domestic manufacturing can save $42 billion in equipment imports by 2030,” it said.

“Other countries have provided massive loans, tax holidays, subsidized utility services, easy access to land and technology support,” it added.

“The Indian government…  has inadvertently created hostile conditions for electronics manufacturing which has made foreign manufacturers close even existing facilities.”

Does this mean the WTO is lily-white? Not exactly.

It stands accused of ignoring claims from developing countries that richer nations have not opened up their markets, lacking accountability and brushing past environmental and human right issues.

It also holds the dubious honour of running a set of negotiations even more fractious than the UN climate talks. The Doha Development Round of talks started in 2001, and are still ongoing.

It’s not perfect – and supporters agree it needs to evolve in a world where ‘global goods’ like clean air, water and climate change are fast rising up national and international agendas.

But saying it’s attacking India’s solar industry is a wild exaggeration and ignores the real failures of India’s clean energy plans.

A better question to ask is of the Modi government: beyond soaring rhetoric, what is it doing to boost its domestic manufacturing capacity?

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