Bingaman says ‘erratic’ policies hurt U.S., help China in clean-tech market

Source: John McArdle, E&E reporter • Posted: Friday, June 15, 2012

As Congress continues a fierce debate over the extension of federal subsidy programs for alternative energy, Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) today said that the inconsistent approach that the U.S. government has taken to promote clean technology is providing an advantage to China.

“Many of the efforts we have to promote clean tech in the U.S. are addressed in an unpredictable fashion, with funds and incentives that expire and come back to life and then expire again, and a lack of clear directional policy that would allow industry to plan for the future,” Bingaman said at a hearing today to study U.S. and Chinese clean energy efforts.

Several key alternative energy subsidy efforts adopted in recent years — through the Energy Improvement and Extension Act of 2008, the American Recovery and Reinvestment Act of 2009 and other laws — face an uncertain future.

Among the incentives now enjoyed by the solar industry is a 30 percent investment tax credit that is set to expire in 2016. But a key wind energy tax credit could sunset this year unless Congress acts. And a popular grant-in-lieu-of-tax-credit program that had been hailed by the solar industry ended Dec. 31 despite vigorous efforts by the industry to get Congress to extend the program.

Meanwhile, a decade of Chinese government policies and financial incentives has turned China into an unquestioned clean energy giant. China now manufactures half of the world’s wind turbines and solar photovoltaic modules and is home to four of the world’s 10 largest wind turbine manufacturers and eight of the top 10 solar manufacturers.

“I believe that the inconsistent approach that we’ve been pursuing has put the United States at a disadvantage in competing with China for a share of clean energy markets — at home and abroad,” Bingaman said. “The U.S. cannot compete on a level playing field with countries that have strong industrial policies when our own policies have been so inconsistent and erratic.”

But as Bingaman argued for a stable foundation of domestic clean energy policies to help the United States compete with China, panel ranking member Lisa Murkowski (R-Alaska) said that there are important differences to keep in mind when comparing the U.S. clean-tech sector to China’s.

“In so many ways I would suggest that we are not falling behind” China, Murkowski said. “From wages and conditions for our workers to our environmental standards and capacity for innovation, I think the United States is leading. We can and should work with China to make progress on our energy challenges, but we should not necessarily copy what they do or how they do it.”

Derek Scissors, a research fellow with the conservative think tank the Heritage Foundation, warned that imitating Chinese investments is a bad idea, especially if it leads to the government disrupting the ability of the free market to develop and choose the best technologies.

“I want stability, but I don’t want the government pushing industry in a certain direction,” Scissors said.

But Clyde Prestowitz of the D.C.-based Economic Strategy Institute warned that China is not playing by traditional free market rules.

China is “not thinking of it in Adam Smith” terms, he said, referring to the famed economist.

Prestowitz noted that China’s latest five-year strategy includes specific plans to support its clean-tech industries and provide coordination to promote China’s dominance in those sectors.

“I think China is committed to developing clean and renewable energy technology in the same way that the United States is committed to achieving air superiority … in Asia,” Prestowitz said. “Developing this technology and leadership in China is a matter of the highest national priority.”

In contrast, Bingaman said the lack of clear policies and support from the U.S. government has forced U.S. companies and industries to rely on trade policy to protect their interests. The most high-profile examples are the ongoing Commerce Department investigations of illegal subsidies for and dumping of Chinese solar modules and wind towers.

“Trade enforcement is critical, but we also need a strong foundation of domestic policies to build upon,” the senator said

While some in the U.S. solar industry have feared that the ongoing trade case could launch a destructive and costly renewable energy trade war, Sen. Ron Wyden (D-Ore.) voiced his support today for the ongoing investigation of China’s “green mercantilism.”

Wyden praised a new report today from the Information Technology and Innovation Foundation that warns that the clean energy trade war has already started and that trade actions like the Commerce case help protect the free trade system.

“I don’t think free trade means trade free from rules,” Wyden said.