Protectionism's adverse impact on renewable energy deployment: evidence from the European Union's import duties on China-made photovoltaic panels

Abstract

Responding to the Paris Agreement on deep decarbonization, many countries have adopted industrial policies to promote their domestic manufacture of renewable energy equipment. If accompanied by protectionism, such policies impede renewable energy deployment that reduces the world's CO₂ emissions caused by production and consumption of fossil fuels. Using the quasi-natural experiment data for 36 OECD countries in 2011–2018, this paper econometrically documents the adverse impact of protectionism on renewable energy deployment based on the European Union's (EU's) anti-dumping and anti-subsidy import duties that took effect in December 2013 on China-made photovoltaic panels (CPP). Its key finding is that these duties had reduced the annual growth in the EU's solar energy share of total electricity generation. This statistically significant (p-value ≤0.05) finding's policy implication is that had the EU not imposed these duties, its solar energy share growth could have been ∼0.7 % per year instead of the observed ∼0.2 % per year in the 2014–2018 period. The estimated difference of ∼0.5 % suggests an increase of ∼0.75 % in the EU electricity industry's CO₂ emissions. Thankfully, the EU's import duties on CPP expired at the end of 2018, thus eliminating one of the adverse effects of protectionism on the world's quest for a clean and sustainable electricity future.