Biden, Congress to Tackle China’s Threat to Inflation Reduction Act
TL/DR –
The Inflation Reduction Act has triggered substantial investments in the U.S. renewable energy sector, however, the Chinese Communist Party’s efforts could undermine these investments and threaten U.S. energy independence. According to the article, China currently controls 72% of solar grade polysilicon and 99% of solar wafer supply chains and is constructing multiple solar manufacturing facilities in the U.S., partly funded by American taxpayers through the Act’s tax credits. The authors call for urgent bipartisan action to combat China’s trade practices, including the use of trade tariffs, the denial of U.S. taxpayer-funded incentives to foreign adversaries, and the implementation of domestic content requirements.
China Threatens US Renewable Energy Investments and Independence
The Inflation Reduction Act has triggered unprecedented investments in America’s renewable energy sector. However, the Chinese Communist Party’s efforts may jeopardize these investments and America’s energy independence.
As more countries adopt renewable energy, both Beijing and Washington have identified solar power as a crucial component of this renewable energy shift, albeit for different reasons. The Biden administration seeks to address climate change and leave a green energy legacy, while China strategically aims to dominate the global solar supply chain. With substantial Chinese-government subsidies and weak US trade policies, China currently controls 72 percent of solar-grade polysilicon and 99 percent of solar wafer supply chains.
The Biden Administration believed that Chinese imports were necessary to meet US climate goals, leading to the suspension of tariffs for two years on Chinese products found to be illegally routed through Southeast Asia. This has allowed China to flood the US market with cheap solar panels, causing prices to plummet and threatening American production.
Despite the Inflation Reduction Act including tax incentives for domestic investment in renewable energy, it does not specifically exclude Chinese companies. China is now building multiple solar manufacturing facilities in the US, partially funded by American taxpayers through Inflation Reduction Act tax credits, potentially being on the hook for up to $125 billion.
China plans to outpace the competition through dumped imports, Inflation Reduction Act credits, and buying solar investments at bargain prices as non-Chinese manufacturers leave the market. This strategy has already resulted in bankruptcies and layoffs at non-Chinese manufacturers in Europe.
Urgent, bipartisan action is needed to counter China’s illegal trade activities, protect US taxpayers, and support a domestic solar manufacturing base that creates numerous good-paying American jobs.
For Democrats, this involves onshoring the solar supply chain, putting national security and clean energy independence above climate goals, supporting penalties when China violates our trade laws, and disqualifying Chinese companies from Inflation Reduction Act tax credits. Republicans need to see energy security as a key component of national security, recognize and block Chinese efforts to monopolize the global market, and accept solar as part of the GOP’s energy strategy.
Congress can address these issues in several ways. Trade tools such as 201 and 301 tariffs can be used to curb unfair Chinese trade practices and enforce violations of trade policies. The influx of Chinese imports into the US has lowered panel prices to the point where US manufacturers cannot compete.
Next, foreign adversaries should be barred from receiving US taxpayer-funded incentives. Domestic content requirements should be increased to ensure that companies investing in America can provide non-Chinese supply chain elements.
A course correction is also needed so that the US does not ignore China’s near-monopoly on renewable energy supply chains. To reduce reliance on China, we need to create an environment where manufacturers are certain that efforts to onshore significant parts of the supply chain count as “domestic.”
Finally, reliance on Chinese companies for addressing climate change is not viable. We’ve learned from our dependence on Russian gas and Middle Eastern oil. We cannot allow America’s energy future to depend on Chinese solar panels.
Taking these realistic steps can counter China’s attempts to undermine the Inflation Reduction Act. Failure to do so puts America’s manufacturing, energy, and solar goals at risk.
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