A bright spot in the US tariffs of solar imports

Today's hottest news relating to the environmental is the imposition of tariffs on imports of solar panels (along with washing machines) by the Trump administration. Ironically it coincides with World Economic Forum summit in Davos.

Per Econ 101 trade barriers cannot be good overall. While I do buy that, if we are to take anything away from the developments of late 2016 it is that thinking in overall terms is practically useless. What matters is who stands to gain (or lose) or are can be seen as gaining (losing). Domestic solar panel industry benefits while domestic solar panel consumers, retailers and installers lose. Government revenues increase due to tariffs and decrease due to reduced sales. The size of each is an empirical question. However, if the affected countries retaliate, there will be loses in the broader economy and this is what economists mean it cannot be good overall.

But let me talk about something I really know little bit better. Climate change is a global problem and while the world could use all the solar we can, in the near to medium term which is the time frame for this policy, it matters where it is installed. On the margin Solar is displacing natural gas in the US market and not coal. If the US is large enough a market, and it is, this should dampen global demand for solar which would lower global solar prices. This will boost demand from  developing countries.  If this can help delay or cancel investments in coal then both the global and local environmental benefits could be larger. So our president's policy might end up helping the poor countries he wants to limit migration from. Of course, you don't need have come this far to keep your chin up as there are reports out there that say this policy will not affect the global solar industry as much as it seems. Now what would be the point of saying this right up front.

You cannot take this to the bank

After spending three weeks in India and exposing my son to  pollution in the name of being sustainable (i.e, not Ubering or Ola-ing every where), I am all the more looking forward to the rapid diffusion of electric cars in our cities. So far I have read reports  that cite automakers, oil companies, transportation industry, consumers, investors, and ofcourse, policy makers. However, one group is conspicuous by it's absence from this list, Bankers. There was a time before 2008 when the phrase you can take it to the bank was worth the ink on which it was written but not anymore.

Apropos this criticism is the picture below from a Bloomberg report citing a Bank of America analysis about the future of oil demand.












I am not going to go into issue of peak oil demand for it is not a question of if but when, and I for one feel the when is not as near as it is made out to be but that is another topic. I refer to my earlier post on Peak Oil here.

Here, I really take issue with how two different phenomena -- share of EV sales and global oil demand over the three decades -- are juxtaposed in a misleading way and misinterpreted as an optimistic future when the actual story it tells is a depressing one for the environment! Notice that the primary y-axis (one on the left) runs from 0 through 100% while the secondary y- axis (one the right) runs from 96 to 106 million barrels per day. In other words, the right axis runs from 0 to 8%, which is the decline in oil consumption from it's peak in the late 2020's. What's more, oil demand is unchanged at 0% from 2016 through 2050. Just think about EV's rise to a 100% of car sales in 30 years time and oil consumption has not dropped one bit. This chart is not one you can take to the bank. For the sake of our own future let us hope that this projection is wrong.

May be I am being too harsh as this post is about bank analysts, a subset within those large institutions who perhaps are more guilty than the rest of their ilk for all that is wrong with them.  Unfortunately, one might find such misleading graphics in academic and scholarly journals as well, which was the point of my 2016 paper on "Peak Cropland". I argue, albeit using correlations only, that global crop acreage is set to keep growing.