Solar energy, it carries the promise to revolutionize energy markets across the world. As an exceptionally clean and obviously renewable energy source, solar energy could one day provide the power needed to fuel our cities and cars. Indeed, when one remembers that oil is in fact stored solar energy, it’s clear that the sun already powers our civilization. Right now, however, solar energy panels are a major point of contention for Chinese and American officials.

Solar Panels

The United States has now slapped steep solar panel tariffs on China, and is looking to close loopholes that let Chinese companies use Taiwan to get solar panels into the United States without paying the tariffs. Chinese officials have warned the United States against imposing such tariffs and escalating any trade conflict.

Meanwhile environmentalists claim that the American government is hurting efforts to encourage the use of sustainable energy

Was China trying to “subsidize” clean energy?

Some environmentalist groups have been siding with China, though for differing reasons. From a certain point of view, the Chinese government could be seen as subsidizing clean energy. After all, even if the American government’s accusations were correct, it would simply mean that the Chinese government was making solar panels cheaper by sucking up part of the costs.

Problem is, trade distortions have a trouble of causing many negative consequences. A trade distortion could result in lost jobs, in this case for the United States. Meanwhile, people and companies need money if they want to buy solar panels, so the lost jobs and businesses could restrain consumer power.

At the same time, unfair subsidizes tend to discourage open and honest competition, which in turn discourages innovation. If American solar panel manufacturers and developers are wiped out through unfair trading, any potential future innovations and industry break through, such as the production of more efficient solar panels, will be lost.

Solar panels: Cat and mouse game between China and United States

In 2012, the American government slapped tariffs ranging between 24 to 36 percent on Chinese solar panels assembled using Chinese solar cells. Chinese companies quickly figured out, however, that they could simply import solar cells from Taiwan or elsewhere before once again exporting them to the United States and thus avoiding tariffs. American regulators have now closed this loop hole.

The Chinese government lambasted the move. The Chinese Ministry of Commerce released a statement saying that it was strongly dissatisfied with the ruling and that it was an abuse of trade remedies and was a protectionist move.

Interestingly, the case was pushed by SolarWorld Industries America, which is actually a subsidiary of a German company.