A strange bit of trouble has been brewing between the US and India these past months in environmental and diplomatic circles. Strange because it is usually the US, with their first world post-materialist agenda that harps on about raising environmental standards while the economic ambitions of a transitional India tends to oppose them. This time it is the US that seems to have a problem with a scheme that plans to reduce India’s dependency on bio fuels, and is a significantly greener source of energy. I am referring to the Jawaharlal Nehru Solar Mission – India’s grand plan to harness solar energy on a large scale.
The issue, of course, is far more complicated than a mere question of standards. In fact the US chagrin is not an environmental issue at all. The problem is a question of trade. The Solar Mission plans to supply close to 20,000 megawatts solar power capacity in India by 2022. However the plan also has a ‘domestic content’ provision requiring solar energy producers to use locally manufactured and subsidized solar cells. India has previously taken active steps to protect its local solar cell manufacturers by starting anti-dumping investigations on various Chinese, US, Malaysian and Taiwanese firms importing solar energy cells into the country. The fact that these firms were allowed tax-free imports, while local manufacturers had to pay taxes on raw materials forced India to consider retroactive duties on imported material.
However, domestic content provisions have always been a matter of discontent in world trade due to the WTO’s ‘national treatment’ provisions. Accordingly, goods imported into a country must be accorded the same treatment as domestic products. The provision therefore has led to the US requesting proceedings against India in the WTO. The Ministry of New and Renewable Energy seems to be toeing the line that these provisions refer to products used for electricity generation – not a privatized sector – and thus government procurement are exempt from the WTO’s ‘national treatment’ provisions. Nonetheless, the government is considering allowing some energy manufacturers to use imported goods for phase II of the Solar Mission.
This change of stance may have been influenced by a recent WTO ruling against Canadian domestic support for solar panel producers. The provisions were opposed in the WTO by Japan, and the EU and Canada’s arguments for such provisions were rejected. Ironically, the EU itself is involved in a dispute with China concerning preferential taxation of Chinese solar panel imports and solar power generation programmes in Italy and Greece. Retributively, China has been subject to complaints from the EU and US over their solar energy policies. All these countries will have made strong note of the Canadian case.
The issue however, has to be seen in wider scope than just as a trade dispute. After all, with a growing fear of depleting energy resources and ever increasing carbon emissions, allowances must be made for the development of renewable energy sources. If the developed world is truly concerned with the environmental standards of transitional countries (a fact that has been made clear in no uncertain terms) then it is quite hypocritical of them to oppose such developments for reasons of domestic protection. These are essentially fledgling industries. Hence, some level of domestic protection is necessary for their propagation. These economies can quite easily regress to an older state of high carbon dependency – a point quite strongly argued by environmental lobby groups such as Greenpeace and Friends of the Earth.
However, the increasing number of disputes concerning solar energy may be considered a testament to the high levels of government interest in this industry. That can only be construed as a sign of increased attention to renewable energy and a gradual move away from bio fuels. If there is a silver lining, this is probably it.