While nations continue to argue over measures to combat global warming, solar panels remain a standout success in reducing greenhouse gas emissions. But they are also generating heat in the wrong places. The European Commission has fanned the embers of a potential trade war by launching an investigation into alleged dumping below cost on overseas markets by China panel makers. Mainland producers have called on Beijing to strike back against Europe for using the same sales tactics, which violate world trade rules. This prompted German Chancellor Dr Angela Merkel to try to cool the row during a visit to Beijing by calling for talks between China and the European Union. That is sensible, insofar as illegal government subsidies on both sides are blamed for contributing to over-production.
Consumers and the environment stand to be the biggest losers from a trade war, which would raise the prices of products that deliver clean, renewable energy. Like carbon trading, the solar panel industry has become internationalised, and perverted for competitive advantage. This has led to massive expansion, particularly in China, which enjoys a competitive advantage in the more labour-intensive production of downstream materials. At the same time demand growth has been undermined in Europe by cutbacks in subsidies for solar panel installation. As a result excessive supply, fierce competition and falling prices have plunged the industry into losses and bankruptcies.
The European investigation follows the US decision in May to slap preliminary anti-dumping duties of up to 250 per cent on Chinese exports of solar cells, and Beijing's retaliatory decision to launch an investigation into US polysilicon exports.
Analysts say a trade war would consolidate the industry. But it would also raise prices and hurt demand. For the sake of consumers and the environment, we trust that Merkel follows through on her call for talks, and that others take it seriously.