Brattle Group Report Finds Impact of Solar Trade Case Will Hurt U.S. Consumers, Workers and Industry

WASHINGTON--An economic analysis prepared by The Brattle Group and released today finds that a 100% tariff on imported solar PV cells and modules from China would result in as many as 50,000 net lost jobs in the U.S. over the next three years. Furthermore, retaliatory tariffs placed on U.S. exports of polysilicon to China would put nearly 11,000 more American jobs at risk in the first year following tariff imposition.

"The Employment Impacts of Proposed Tariffs on Chinese Manufactured Photovoltaic Cells and Modules"

According to The Brattle Group's analysis, the imposition of tariffs will "slow the growth in domestic demand for photovoltaic systems by homeowners, commercial establishments and power producers, resulting in substantial job losses."

The study, commissioned by the Coalition for Affordable Solar Energy (CASE), examined the impacts that imposing a 50% tariff or a 100% tariff would have on the U.S. solar industry through 2014. Both scenarios are lower than the up to 250% tariffs sought by SolarWorld, the German-based solar cell company, in its petition to the U.S. Commerce Department and the U.S. International Trade Commission. For each scenario, the study provides both a low and high estimate to account for variability in modeling the price elasticity of supply and demand.

According to the study, a tariff of 100% would result in consumer losses between $698 million and $2,620 million. That would eliminate between 16,917 and 49,589 American jobs over the next three years. Similarly, a tariff of 50% would result in net consumer losses between $621 million and $2,287 million. That would cause between 14,877 and 43,178 job losses over the same period. These figures are all net of any potential gains in cell or module manufacturing.

"This analysis makes it clear that imposing even a 50% tariff, much less than SolarWorld has requested, would be devastating for American workers," said Jigar Shah, President of CASE. "We cannot allow one company's anti-China crusade to threaten the U.S. solar industry and tens of thousands of American jobs."

Dr. Mark Berkman, author of the report and principal at The Brattle Group, stated, "While the U.S. solar industry has many facets and is quite complex, we were able to model the industry by utilizing straightforward economic analytical methods. We started by projecting the reduced demand for solar systems resulting from price increases due to tariffs. We then analyzed projected job gains and losses under two scenarios, each using a 50% and 100% tariff on imported solar cells and modules. Even under the most conservative assumptions, we did not find a scenario where imposing a tariff would create more jobs than it eliminates."

According to the Brattle analysis, if no tariff is imposed "the aggregate demand for photovoltaic systems is expected to grow from 1,678 MW in 2011 to 4,894 MW by 2014. A 50% tariff will raise industry-wide prices and delay solar industry growth, with total MW demand falling to as low as 3,350 MW in 2014. A 100% tariff will delay this growth even more with demand falling to as low as 3,159 MW in 2014. It is a significant decline in the market for solar cells that is central to the decrease in jobs identified in this study."

To measure job effects of solar module price increases, the Brattle analysis uses the same type of analytical model (IMPLAN) as government agencies, industry and economists to measure economic impacts.

Another aspect analyzed in the report is the effect of likely retaliation by the Chinese to any U.S. imposed tariff on imported solar cells from China. According to the report, "retaliation would likely take the form of a tariff on U.S. polysilicon exports. The U.S. is a major supplier of this component of photovoltaic modules, and removing Chinese demand for U.S.‐manufactured polysilicon is expected to result in around 10,881 U.S. job losses in the first year after tariffs are imposed."

"This is an eye-opening analysis," said CASE's Shah. "Even after accounting for job gains in solar cell manufacturing, the likely job losses in the rest of America's solar industry and economy are staggering."

Shah also noted that the findings of this study are consistent with a recent story ("Get-Tough Policy on Chinese Tires Falls Flat") in The Wall Street Journal in regard to tariffs placed on Chinese tires. As the Journal reported, "The measure was meant to whack imports of passenger and light-truck tires and give a boost to manufacturers and job creation in the U.S. Yet, for a variety of reasons, it has apparently done little of either—and has surely raised prices for consumers." Shah added, "Imposing tariffs on imported Chinese solar modules will have the same perverse results."

Notably, The Brattle Group's study did not consider the potential impacts that increased solar electricity prices could have on undermining support for solar policy across the United States. Analysts have expressed concern that solar industry infighting and higher prices would undermine the solar industry's credibility and public policy support.

"Cost is the single most important factor in the ability to grow U.S. solar markets. Most U.S. incentive programs are predicated on a declining cost-curve. In these political and economic times, getting to scale will depend on parity with alternatives," said Adam Browning, Executive Director of Vote Solar Initiative, a non-profit public advocacy organization that works to build state solar markets.

To download a copy of The Brattle Report, "The Employment Impacts of Proposed Tariffs on Chinese Manufactured Photovoltaic Cells and Modules", visit www.coalition4affordablesolar.org.

About The Brattle Group

The Brattle Group provides consulting services and expert testimony in economics and finance to corporations, law firms, and public agencies worldwide. Areas of expertise include antitrust and competition, valuation and damages, utility regulatory policy and ratemaking, and regulation and planning in network industries. For more information, please visit www.brattle.com.