Given the increasing protectionism worldwide across sectors, it is indeed difficult to push for liberalising trade in solar.
Nevertheless, the urgency of environmental concerns demand platforms like International Solar Alliance (ISA) to work for easing solar related trade.
Notably, tariffs and other forms of trade protectionalism are hinderances to the faster spreading technology.
What is International Solar Alliance?
Several countries had taken ambitious steps to combat climate change and India for its part has initiated the International Solar Alliance (ISA).
Recognizing the huge potential, India along with France, launched ISA during the Climate Conference in Paris in November 2015 (COP21).
ISA’s objective is to undertake joint efforts to reduce the cost of solar technology and further investments in solar ($1 trillion targeted by 2030).
India has set a domestic target to install a 100 GW of solar energy capacity by 2022 to augment its power needs.
Notably, Of the ISA member countries located in the sunshine belt between the Tropics, only 27 were found to be providing 100% electricity access.
Additionally, in 49 countries (mostly in Africa), electricity access rate was less than 70%, which demands for rapid expansion of solar infrastructure.
While ISA has been mobilising resources for projects, it also needs to work for easing trade barriers in solar equipments and services trade.
Is the sector protectionist?
Import duties (tariffs) and other protectionist clauses are detrimental to cost-effective solar deployment, which disincentivises solar investments.
While the cost of solar installations has been declining worldwide, it still remains high in many of the ISA economies.
This is mainly due to their lack of manufacturing capacity and high tariffs (35-40% in some countires) on solar PV products and related services.
For most African countires, this is the case, despite they having a remarkable potential to promote innovative programs like off-grid solar.
Also, while India has 0% tariff on most solar trade lines, it was ironically embroiled for imposing domestic content requirements for projects.
What could the ISA do for promoting solar trade?
As ISA is a recognised international organisation, it has the potential to mobilise international support for liberalising solar trade among its members.
Action - 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.
This would result in a plurilateral voluntary trade deal (sector specific deal) on solar energy goods and services, and benefit both trade and the environment.
Firstly - This will help in capitalising on global supply chains and economics of scale, and allow for massive deployment of affordable solar projects.
This would result in rapid reduction of applied tariffs along the solar supply-chain even without the conclusion of a binding trade agreement.
Notably, an “Environmental Goods Agreement” (EGA), for reducing tariff lines in order to promote green technologies has been in discussions since 2014.
Secondly - This would reduce chances of disputes over what goods to be included in ISA’s targeted push as there would be more domain knowledge.
Even if some of the goods may have dual-use and can be deployed for non-solar applications, dispute resolution would be easier under ISA.
Finally - Opportunities to integrate into global solar value-chains may be opened up for developing countries through international partnerships.
Devising investment norms, facilitating technological know-how, and bettering trade objectives could be considered by ISA.
