China, a dominant player in renewable energy sector, has received significant government subsidies
OECD countries in 2023 increased subsidy programs to counter China
Now, governments have to strike a balance between achieving ambitious climate goals and ensuring fair market competition
A new trade policy paper released by the Organization for Economic Co-operation and Development (OECD) dwells into the evolving landscape of government subsidies for solar modules and wind turbines from 2005 to 2023. The findings show significant shifts in support patterns, as OECD countries step up subsidies in recent years to counter China’s dominance in the renewable energy sector.
Over the past 2 decades, the solar module and wind turbine industries have undergone transformative changes, reshaping their value chains while also raising critical concerns about overproduction, supply concentration, and government subsidies. These shifts have not only influenced the dynamics of global renewable energy markets but have also led to debates over fair competition and sustainable practices.
OECD study reveals that subsidies have been larger for solar module producers than for wind turbine manufacturers. China has been a dominant player, with its manufacturers benefiting from significant government support for much of the past 2 decades. However, 2023 marked a notable shift as OECD countries increased their own subsidy programs, narrowing the gap and signaling a competitive push to boost domestic industries in the face of China’s longstanding dominance.
This evolving subsidy landscape highlights the delicate balancing act for governments striving to achieve ambitious climate goals while ensuring fair market competition. Subsidies play an important role in promoting renewable energy adoption and innovation, but they also risk distorting markets, creating overcapacity, and concentrating supply chains.
As the world fast-tracks its clean energy transition, this paper highlights the complex trade-offs policymakers face between driving climate progress and maintaining a level playing field for global manufacturers.
The paper can be downloaded here: https://www.oecd.org/en/publications/government-support-in-the-solar-and-wind-value-chains_d82881fd-en.html