Abstract:
When Solyndra, a California-based solar panel maker, filed for bankruptcy in 2011, the US government was left with more than half a million dollars in unpaid debt. The bankruptcy was a major embarrassment for the Obama administration which had touted renewable energy companies like Solyndra as the wave of the future, and had invested billions of dollars in government loan guarantees to promote them. The Chinese government, however, had outpaced the US in providing loan guarantees and subsidies to solar manufacturers and helped transform the country's nascent solar manufacturing industry into a world leader. Chinese dominance in the solar market ultimately triggered a high-stakes trade war between the United States and China but neither country could contain the massive downturn in the solar market that began in 2012.
The case provides an in-depth account of the complex and often competing agendas on climate change, industrial policy and free trade which fueled the politically charged trade battles between the US and China. Against the backdrop of the global environmental challenge, the case includes details on the Obama administration's signature energy subsidy program and the factors that led to Solyndra's collapse. It also traces the rise of China's solar industry as well as the trade complaints made by the US against China at the World Trade Organization and the subsequent Department of Commerce decision to impose penalties against Chinese solar panel makers.
Learning Objective:
The rapid rise and sudden downturn of the solar industry in the US and China offer insights into the political realities that fuel industrial policies. Students examine the role of governments in supporting industries and how effective they can be in picking winners. By analyzing the trade wars between the US and China, students explore the interplay between the global trading system and climate policy and seek optimal policy solutions for addressing climate change.
