Yesterday, a dispute settlement panel at the World Trade Organization released an official report finding that local content requirements in India’s solar power scheme violate global trade rules. The ruling condemns a particular protectionist policy that dilutes the effectiveness of solar subsidies by diverting them to inefficient domestic manufacturers. The case is one more example of how global trade rules help to prevent green energy initiatives from becoming expensive crony boondoggles.
Although the report was just released, we’ve known what the outcome would be since last September. At the time, I wrote about how India’s local content requirement harms its own green energy initiative:
The ruling ought to be celebrated by advocates of solar power. The local content requirement acts as a drag on the program by making solar power plants more expensive to build. Allowing solar energy producers to purchase panels on the global market not only reduces prices for those producers, it also furthers the development of efficient supply chains for solar panel production.
Predictably, however, some green groups are not happy with the decision. According to the Sierra Club, “the WTO has officially asserted that antiquated trade rules trump climate imperatives.” They’re fully committed to the idea that—contrary to the lessons of history and economics—full-fledged green industrial policy will lead to a future of “100 percent clean energy.” They believe filling the economy with “green jobs” is politically and economically necessary to achieve their environmental goals.