China’s Mercantilist Policies on Solar Photovoltaics Reshaped Global Innovation, Potentially Making It Harder to Solve Climate Change, New ITIF Report Shows

October 5, 2020

WASHINGTON—Excessive subsidy-powered competition from China decimated solar photovoltaic manufacturing in the rest of the world in the 2010s, eliminating multiple innovative companies and altering the path of innovation, according to a new report released today by the Information Technology and Innovation Foundation (ITIF), the world’s top-ranked think tank for science and technology policy. 

China’s rise to dominance in PV manufacturing did drive prices way down, but at the cost of undermining promising alternative technological pathways that may be more effective in producing clean energy, the report finds. ITIF argues that policymakers around the world should act to curb China’s brand of innovation mercantilism and adopt measures that would create and sustain technological diversity in PV and other climate-critical technologies.

“While China’s subsidy-fueled surge in PV manufacturing was a gift that accelerated global adoption in the 2010s, it had long-term consequences for technological innovation,” says David M. Hart, senior fellow at ITIF and author of the report. “Mercantilist policies helped destroy many innovative firms outside of China, constrict new entry, and limit investments in innovation by the survivors. Looking forward, sustained mercantilist behavior could undercut a coming wave of innovation that might otherwise allow PV to take another great leap forward.”

The ITIF report urges policymakers to take measures that would create and sustain diversity in PV technology and, by extension, in other energy and climate technologies with similar characteristics. In order to advance these goals, policies should include:

  • Increased public R&D spending in the United States and other R&D-intensive countries on alternatives to today’s dominant crystalline-silicon design;
  • Market-pull policies, such as carve-outs for alternative designs within portfolio standards, as well as tiered tax incentives and feed-in tariffs (FITs) that award alternatives a higher level of support;
  • Public-private co-investment in manufacturing and supply chains informed by strategic analysis of technologies and markets;
  • Stronger enforcement of international trade law and updating of U.S. anti-dumping rules; and
  • International cooperation featuring reciprocity and transparency to strengthen learning and build open markets that support innovation.

“Policymakers should act to create and sustain worthy innovations in PV,” adds Hart. “A collaborative effort among China’s competitors would be the best way to implement such steps. That collective effort should then be extended to sustain innovation in other climate-critical technologies that are similarly at risk from Chinese mercantilist policies.”

Read the report.