Antidumping and Feed-In Tariffs as Good Buddies? Modeling the EU-China Solar Panel Dispute

Abstract

The paper analyzes the interactions between trade and renewable energy policies based on the EU-China solar panel dispute which is the most significant antidumping (AD) complaint in Europe. We build a price competition duopoly model with differentiated products and intra-industry trade in photovoltaic (PV) equipment. We show that an optimal antidumping duty always increases with the feed-in tariff (FIT) program set in the home country. An appropriate antidumping duty—nullifying the dumping margin—decreases with the FIT program. We show that optimal FIT increases with the AD duty. Therefore, trade and renewable energy optimal policies may complement one another. Lastly, we introduce R&D activities in the PV sector, and international spillovers. We show that R&D makes the optimal FIT lower and increases the dumping margin. These effects are reinforced by technological spillovers.