Do clean energy trade duties generate employment benefits?

Abstract

Renewable energy (RE) trade disputes have been rising in response to certain green industrial policies, i.e., policy mechanisms used to develop domestic RE industries and accrue associated local economic benefits. Since 2011, countries have been increasingly filing trade litigations to counter the use of green industrial policies by their trading partners so that they can expand RE industry competitiveness and the associated manufacturing jobs within their own countries. However, in the absence of systematic studies on the impacts of RE trade duties, evidence regarding their success in achieving these economic goals remains limited. In this paper, the effectiveness of RE trade duties in supporting employment, especially in manufacturing, is assessed. First, the literature on the motivations behind RE trade duties is reviewed, and then the case of trade duties imposed by the US on the imports of solar and wind energy components from China between 2011 and 2019 is examined. Although several factors may drive employment, no evidence is found for the increase in jobs in solar and wind manufacturing in the years after the trade duties were imposed. Meanwhile, downstream jobs in installation, operation and maintenance continued to grow, corresponding to increases in annual installation of solar and wind capacity in the US. These were driven by policy incentives and the declining costs of solar and wind technologies. Overall, this case study highlights the broader implication that trade duties alone are unlikely to promote local manufacturing industries, and countries would benefit from other well-designed policies.