China to probe US clean energy subsidies

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By Leslie Hook in Beijing

China has launched a trade probe into US subsidies for renewable energy, the latest volley in a quickly escalating trade dispute over clean energy policies between the world’s top two energy users.

China’s Ministry of Commerce announced on Friday that it would investigate US government support for clean energy and could file a case with the World Trade Organisation, depending on its findings.

The global clean energy sector, a $240bn a year industry, has been facing headwinds this year as supplies of wind turbines and solar panels have outstripped demand in some key markets. Trade tensions have been rising between the US and China ever since the office of the US Trade Representative initiated an investigation into Chinese wind subsidies last year.

Trade barriers in clean energy were high on the agenda at the Asia Pacific Economic Cooperation Summit in Hawaii earlier this month, where Apec members agreed in principle to reduce barriers on clean energy goods and services by 2015.

The trade probe from Beijing follows a US trade investigation into Chinese solar cells and panels initiated earlier this month. The case could result in penalty tariffs of 50 to 250 per cent on imports of Chinese cells and panels if it concludes that anti-dumping tariffs or countervailing duties are merited.

Although the Ministry of Commerce statement did not mention the US panel probe, the announcement follows an outcry from Chinese solar industry associations and officials who have called for trade countermeasures.

Chinese panel sales to America have been growing rapidly but the US is still a net exporter of solar equipment to China because of sales of polysilicon, a key ingredient for making solar panels, and of panel-making machinery. Last year the US exported more than $1.7bn of solar products to China and imported $1.4bn, mostly panels, according to research from the Solar Energy Industries Association.

Gao Hongling, deputy secretary-general of the China Photovoltaic Industry Alliance, said in an interview before the probe was announced that a potential trade war would hurt both sides.

“If we launch countermeasures, American raw material and equipment firms will take a very big hit,” she said, adding that China imported $830m of polysilicon from the US last year.

Both the US and China, the world’s top two energy users, have made renewable energy a priority of their domestic energy strategies and support clean energy with a range of policies including tax breaks, loan assistance and fast-tracking permits.

China is the world’s biggest investor in clean energy, spending $54bn last year, while the US is the world’s third-biggest, investing $34bn in the sector last year, according to research from Pew Charitable Trusts.

The Ministry of Commerce said its trade probe was launched in response to petitions from industry bodies. “The applicants proposed that the US government’s supportive policies and subsidy measure to its domestic renewable energy industry violate WTO rules, hinder and limit the development of China’s renewable energy industry, and constitute trade barriers,” the statement said.