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.
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.
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