Environmental Goods Agreement

The Environmental Goods Agreement is being negotiated by 14 countries/regions with annual traded value of over $1 trillion, to bring an end to the numerous wars that have broken out between different countries. Solar modules are also part of the 54 goods that are part of this agreement. Most regions are promoting environmental goods through active subsidies and incentives, as green products are still not economically competitive with normal products. This is being done as a part of the global movement against climate change. However, these subsidies also provide an edge to some companies against the foreign companies which do not get them. This had led to increasing trade friction between major companies. Solar modules have become a hot potato, with USA imposing ADD on China and China in turn imposing ADD against EU and USA on imports of the module raw material polysilicon. Wind turbines have also seen a lot of trade action between the different groupings.

The main problem is that it is hard to distinguish when a country is promoting environmental products for fighting against global warming and when it is doing so for promoting their domestic industry against foreign ones. China has massively subsidized their solar and wind energy companies leading to bankruptcy of hundreds of European and USA companies. They have given billions and billions of dollars in debt and grants such that solar and wind energy prices have crashed over the last 5 years. Angry foreign governments have retaliated through duties and volume quotas. WTO has not been too effective in solving these issues, as it takes a long time to process the disputes. This new agreement between all the major actors sans India is trying to negotiate a deal by 2015. It will be a landmark agreement and go a long way in fighting climate change.

Lack of talking between the major trade partners has led to this impasse, where everyone is losing- the consumers, producers and the fight against climate change. The only winners are the fossil fuel producers who get more time to extract CO2 emitting fossil fuels at high prices. Solar and wind energy prices are rising as countries impose duties on cheap imports leading to more difficulty in competing with cheaper fossil fuel energy.