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Dismantling high tariff barriers on solar equipments

Dismantling high tariff barriers on solar equipments

Context:

Given the increasing protectionism on trade across the globe, a call for liberalising trade and that too on solar, could be construed as utopian. To leave behind a habitable world for future generations, we must challenge protectionism in solar trade.

Issue of Solar tariffs:

  • While the cost of solar installations has been declining worldwide, it still remains high in many of the International Solar Alliance (ISA) economies. This is accentuated by their lack of manufacturing capacity and high tariffs on solar PV products.
  • Most African economies have higher most favoured nation (MFN) tariffs for PV cells, modules, and semi-conductor devices, despite the fact that they have a remarkable opportunity to promote off-grid solar, given the paucity of transmission lines. Under the MFN principle, WTO countries cannot normally discriminate between their trading partners.
  • Island countries have among the highest MFN applied rates for solar-related products, such as photosensitive devices and solar heaters. Some of the countries across regions have tariffs as high as 35-40 per cent.
  • India, a large market for solar PV installations, has zero per cent tariff for photosensitive semiconductor devices, including photovoltaic cells.

Role of ISA in bringing sustainable energy trade:

  • With ISA being recognised as a treaty based inter-governmental international organisation in December 2017, it can galvanise support to voluntarily reduce tariffs within the ISA economies.
  • ISA could nudge its members to voluntarily reduce import tariffs and non-tariff barriers on solar-related products and related services.
  • In case there is a domestic industry that would be hit, a gradual reduction of tariffs over a period of time could be worked out.
  • Applied tariffs along the solar supply-chain would come down fairly fast without the need to wait for the conclusion of a binding trade agreement
  • Such a deal would reduce chances of disputes over what goods to include or exclude in the final ISA trade agreement.
  • Opportunities to integrate into global solar value-chains may be opened up for developing countries.
  • They could partner with developed ones and over time develop state-of-the-art technologies and equipment for its domestic market, as well as sell to many ISA countries with similar needs.
  • Devising investment norms, facilitating technology know-how, and bettering trade objectives could be considered by ISA.
  • Trade, therefore, could also be used as an instrument facilitating technology dissemination for the global good.

 

 

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