China Racing Ahead of U.S. in the Drive to Go Solar

China is striving to become the world’s leader in production of solar panels not unlike Japan’s drive for dominance in automobiles in the last century. And just like Japan, China plans to build factories in the US in the hopes of circumventing protectionist legislation. Beijing can afford to foster such an industry not only because it is a quasi-command economy, but also because of the size of its reserve. Chinese state-owned banks are providing loans for investment in solar panel projects at interest rates lower than the US or Europe. But while this sounds like market competition leading to an environmental solution, analysts argue that all this investment is unlikely to dampen global warming. China’s energy consumption is growing faster than the rest of the world, although the US remains the largest absolute consumer. Moreover, some Chinese producers admit to selling below the marginal cost of production, which, while making solar energy more affordable, could lead to an anti-dumping backlash down the road. In the end, just like the automobile before it, solar panels are becoming a nexus of global environmental, economic, and government policies. – YaleGlobal