China Removes Import Duties on Wind and Hydro Equipment

Every day that climate change and clean energy legislation is stalled in the Senate, the US loses out on opportunities to benefit from the clean energy economy.  A new Chinese trade policy has just been announced that will give a boost to international companies that sell wind power components to China's rapidly growing wind market. But this policy is likely to provide the biggest benefits to European countries, such as Germany, Denmark, and Finland, and not the US because there are still relatively few US producers in the wind component industry compared to Europe.

The new policy (in Chinese only), just introduced by China’s Ministry of Finance, removes import duties previously applied to a range of products, including imported components for building wind turbines (excluding the completed turbines) and hydropower. To be eligible for the duty-free treatment, the buyer must be an advanced Chinese wind turbine producer that meets certain technological and size requirements.  Previously, Chinese wind and hydro companies that purchased imported components were required to pay an additional import duty, which ranged from 3 to 30 percent. This import duty meant that American and European wind and hydro component makers faced a disadvantage when competing for the Chinese market.  By stripping wind and hydro components of this tariff, China’s new policy essentially expands the market for foreign wind and hydro component makers to sell more products to China.

The new policy is a reminder that the United States has a lot to gain from becoming a leader in clean energy.  Unfortunately, the United States is not well-positioned to profit from this opportunity because the world’s leading wind component companies are in countries that have already made clean energy a national priority. Finland, Sweden, Denmark, and Germany all have strong policies to promote wind energy installation, creating thousands of clean energy jobs in the process. (Germany’s wind industry employs more than 169,000 people in the country.)  And one of the biggest beneficiaries of China’s new policy will be Moventas, one the world’s largest wind turbine gear companies, which hails from the small country of Finland.

Here is what Justin Wu, a China wind energy analyst at Bloomberg New Energy Finance, had to say about this new policy and why the US is losing out:

"European companies are better positioned to benefit from this policy, because they supply more to the Chinese market than their US counterparts.”

“This is a function of the more advanced nature of the European wind industry versus the US which has faced more policy uncertainty over the past decade in developing the supply side of its wind industry. As a result, the US also imports heavily from Europe and only a small handful of US companies currently export wind components to China or other countries."  

What is exceedingly clear is that policy uncertainty in the US regarding clean energy and carbon pollution is causing American businesses to lag behind. In the process, US businesses are losing tremendous opportunities to lead the clean energy market.

One of the objectives of this new policy is to promote the development of China’s most advanced wind turbine manufacturers, since only those turbine manufacturers that can produce 1.5 MW or larger turbines and that sell more than 300 MW per year are entitled to benefit from the duty-free provision. Separately, China has also recently been considering steps to consolidate its wind industry (Chinese), issuing draft regulations for comment that would require wind turbine producers to have the capability to produce 2.5 MW turbines or larger. The removal of these import duties is yet another policy that will support the advancement of China’s wind turbine industry.

At any rate, the new policy shows how seriously China is thinking about its clean tech industry. As companies across the globe develop and manufacture clean energy components, subcomponents, and entire systems and trade them across borders, the clean technology economy will become an increasingly globalized one, in which countries benefit from each other’s technological advances.

But to profit from the clean energy economy, the United States will need to unleash the potential of its own clean energy industry.  And it will be very difficult for American businesses to compete with German and Finnish companies without a clear signal and appropriate incentives to invest in clean energy even at home.

One notable exception is American Superconductor, a company based in Massachusetts, which sells advanced electrical control systems for wind turbines in China. Since 2007, American Superconductor has been partnering with a Chinese company, Sinovel, to develop new 3 MW and 5 MW wind turbines. Because it supplies valuable wind components to China, American Superconductor is one U.S. company that will likely benefit from China’s new import policy.

The United States needs more companies like American Superconductor that can take advantage of the Chinese market by offering cutting-edge technologies to fight climate change. China’s new import duty policy should remind us that the best way to help American businesses seize clean energy opportunities abroad is by passing climate change and energy legislation at home and making clear that the U.S. is serious about growing its clean energy industry and competing in the global race for clean energy.