Ray of Hope? China and t he rise of Solar Energy
Abstract:
The rapid decline in the global cost of solar panels coincided with China’s growing market dominance in solar photovoltaics (PV) from the early 2000s. We evaluate the effectiveness of local, city-level policy eff orts to encourage the growth of the solar industry in China. We develop nov el measures covering all policies since their inception based on text analy sis; construct original data on patenting, production and trade; and implem ent a synthetic-difference-in-differences approach. We show that city-level subsidies for solar production cause large increases in the production of solar panels and - with a lag - also raise innovation and the productivity of solar panel manufacturers relative to firms in matched control cities th at did not implement such policies. Cities which combined production subsid ies with R&D support showcased even larger positive effects on solar in novation and production. We also document positive impacts on solar firm nu mbers, revenues, and exports from these production and innovation subsidies . In contrast, demand/installation subsidies targeted at increasing city-le vel generation of solar electricity have no significant impact on city-leve l solar innovation and production as additional demand can be met with sola r panels produced in other Chinese cities. These results are consistent wit h the predictions of a model in which electricity is supplied locally using components (e.g. solar panels) sourced from heterogeneous manufacturers ac ross China, who endogenously choose whether to pay the fixed costs of innov ating and/or exporting. Taken together, these results suggest that in dustrial policy can foster innovation and growth in clean energy. The fact that we observe this in an industry that is displacing dirty energy generat ion worldwide magnifies the importance of our findings.
DTSTAMP:20260424T193505Z DTSTART:20231009T143000Z DTEND:20231009T160000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR