Tuesday, September 14, 2010

The Controversy Over Cheap Clean Energy

The short story is that the Chinese government has been subsidizing the development and production of these technologies for its domestic companies. Then these companies have been able to sell its products at a lower cost and still make a profit. Apparently, the Chinese companies have begun to sell the products such as wind turbines and solar panels at below cost to U.S. companies. The argument is that this action is hurting certain U.S. industries.

So I can understand how certain sectors of the U.S. economy would lose out due to the low prices of the Chinese companies, such as the manufacturing industry. However, it is hard to wrap my brain around the fact that people would rather have the Chinese selling at higher prices. It's not as if clean energy is bad for anyone. In fact, it seems like other sectors of the U.S. economy would be greatly benefited from a cheap source of clean energy. Becoming less dependent on fossil fuels and foreign suppliers of oil seems like a win-win situation because it helps ease pollution and lower dependency on oil.

The Chinese government is doing a good deed by granting these subsidies. Maybe the U.S. government should also subsidize its own companies so they won't be undercut by competition? Maybe it should move some of the tax dollars from inefficient agricultural subsidies? Really, there is no price too low for clean energy supplies. In the long run, the U.S. economy overall will benefit because other companies and consumers will have access to cheap clean energy.

The problem with switching to clean energy is the initial start-up cost of getting the equipment - afterwards, besides maintenance costs, there is basically a free flow of energy. From this angle, it definitely seems like Chinese manufacturers are helping U.S. companies get a hold of cheap supplies that will drastically lower their costs in the future, even if the Chinese companies only have economic motivations. I mean, hypothetically, what if the Chinese government just started giving us free wind turbines and solar panels? Would we still have the same reaction?

I don't know. I am definitely far from an expert in this field and there may be many issues that I am forgetting or don't understand. This is just my gut reaction to all the uproar over the incident. What do you think? Do I have a valid point or am I misunderstanding some fundamental principle?


  1. I'll be completely honest. Usually I have a firm opinion on everything, but when it comes to finance...especially global economy and politics...I'm TOTALLY clueless. So right there with you, sister.

  2. Yes, I agree it is a really complex issue with many different perspectives. Otherwise, it would be easy to find a solution and agreement!

  3. I listened to an NPR podcast on this!

    So I think the issue is that we will lose jobs to China - which is bad when we're in a recession and trying to create jobs. It could actually just make the recession worse.

  4. I guess it depends what you mean by lose jobs to China...for example, that because U.S. manufacturers are undersold, those workers will lose jobs? But doesn't it seem like the other industries that gain cheap clean energy technologies will be able to create more jobs?

  5. Unfortunately, while capitalism does support buying cheap products because that frees up more capital for use, theoretically causing increased employment and higher wages and higher productivity, the benefits of capital are not spread evenly, causing people to lose their jobs or to become financially unstable through the loss of job contracts, despite the fact that greater amounts of capital are in the economy. Though to me, this seems more political than economic. The labor union and these politicians are ineffectual at looking out for the well-being of their constituents: American businesses have gone abroad, the US's entanglement with China doesn't allow the US to regulate its own economy through tariffs and taxes, and I doubt little will be done to provide a safety net for the workers who have no direct route to benefiting from an improved economy where they are unemployed or lose out on a contract. I completely support China's subsidizing green technology - it is what the US should be doing - but I feel sorry for the laborers who have such lousy representation that cannot make sure that their well-being will be looked after while the rest of the economy benefits. This case won't fix the general problems in the system, it's using the legal system as a political stunt right before mid-term elections, and it shows that America is looking for scape-goats, such as China, instead of developing its own economy. It's theatre over reality.

  6. Check out the Bill Clinton interview on the Daily Show. It's the Extended Interview Part 2. He talks about competition with China's green production.