Globalizing Solar: Industry Specialization and Firm Demands for Trade Protection

Abstract

Governments are investing billions of dollars in low-carbon energy technologies in order to address climate change. Recently governments have also adopted protectionist measures in low-carbon energy technology sectors. In the solar photovoltaic industry, governments in both Europe and the United States responded to a rise in Chinese module exports through the imposition of tariffs, voluntary export restraints and other measures. The government in Japan, however - another major solar market - has not done so. We hypothesize that the position of firms in global value chains shape their preferences vis-a-vis trade protection. Our findings show the policy positions of the majority of firms align with expectations. In doing so we provide evidence that industry specialization shapes firm demand for trade protection in a major green industry. More generally, our research suggests the globalization and fragmentation of supply chains creates important trade-offs for governments by pitting industrial interests against upstream and downstream firms and environmental interests seeking to maximize market penetration of renewable technologies.