India-China Renewable Energy Trade: Setting a Research and Policy Agenda

0:06 Welcome and thank you for joining us. I'm Carolyn Frey, dean of the School of Global Policy and Strategy at UC San Diego and the school is most commonly known as GPS. So, I'm probably going to say GPS a lot, so just so you know what that means. We have a number of faculty-led research centers and programs that focus on creating solutions to global policy problems. And today's event is organized by two of our centers um the 21st century India center and the 21st century China center. GPS has long been known for our work on China where we have a number of scholars working on issues related to Chinese political and economic systems as well

0:53 as US China relations and in the last few years we've also developed considerable expertise on India and launched this India center and we're working to identify policies that support economic competitiveness and US India trade and investment relations uh as well. So over the last two decades both China and India have ramped up policy efforts to establish themselves in the production chain of clean energy equipment. China's initiatives have led to dominant positions in the market for solar. I think they're like 80% I'm sure uh Michael can correct me if I'm wrong

1:39 of production in solar, wind, rare earth materials and electric vehicles uh where of course they're also soaring. Um and meanwhile India's efforts to establish domestic manufacturing capacity are developing. Um so in this research project, professors Trock Gar and Michael Davidson have been examining this evolving relationship and the interactions of trade and industrial policies in developing these sectors. TRA is an associate professor of economics at GPS where he heads the energy transitions initiative at the 21st century India center. He's an

2:25 expert on climate adaptation, decarbonization, and energy transition. He's also the co-founder of Powder Technologies, a solar enterprise focused on scaling demand response in emerging economies. Michael Davidson is an associate professor joint with GPS and the mechanical and aerospace engineering department in the Jacobs School of Engineering at UCSD. He leads the power transformation lab which focuses on engineering implications and institutional conflicts inherent in deploying lowcarbon energy at scale. Besides work on India, he's also a faculty member with the 21st century

3:11 China center. So I'm going to invite audience questions through Zoom. Um and you may use the Q&A feature. We also have uh excellent panelists and I'm going to wait to introduce them till after the presentations. So please uh go ahead um Michael. >> Great. Thanks so much Carolyn. Uh sharing my screen here. Okay. Um so we're really excited to share uh some preliminary data and descriptive findings from our work on what what we're calling the agenda on renewable energy trade between India and China. Uh

3:59 I think the motivation as as we've already heard is that China has become dominant over the last two decades in um clean energy manufacturing including solar uh wind, batteries, electric vehicles uh and mineral inputs to these key technologies. Um and India uh wants to decarbonize and build domestic industry as it scales up its own climate ambitions. Um here the challenge is that Indian firms are currently not globally competitive. Um we're showing here the global market share across various uh PV component chains as well as wind supply chains. And so in the extreme case uh China has over 95% of the global market

4:45 share in some PV components um and still quite large in other components with the the wind chain. um and that's shown here also in EVs and batteries and minerals and many other uh components of of the clean tech supply chains. So India has ambitious targets to achieve net zero by 2070 and then by 2030 to deploy large amounts of non-fossil and renewable energy capacity. Um and it's also in a unique uh geostrategic position in that um it's hoping to build on the broader trends and efforts from international partners including the United States for alternatives to China's supply chains. Uh this uh these go under various names.

5:31 Um de-risking or friend shoring. Um and India has uh a potentially unique position here to both be a manufacturing powerhouse but also uh a friend partner um or even ally of some of these other countries trying to derisk from China. Now, what are the potential uh effects of combining a large-scale manufacturing push uh with glo clean energy deployment? Uh well on the one side policies such as tariffs or local content requirements uh could um increase the cost of deploying clean energy and that could delay India's transition uh by raising the cost of these alternative resources uh which are already cheaper than fossil

6:18 resources in most contexts. On the other hand, uh building a strong manufacturing base in India as in other countries can create continued durable political support for clean energy deployment. And then I because India is uh so large and such an important test case, India's success or ability or inability to achieve these twin goals will have pretty wide implications for the rest of global clean energy markets. And as we look at how many other countries uh uh including in Southeast and South Asia are thinking about growing domestic manufacturing of clean energy uh India's success could have many um important uh

7:05 lessons uh to be had. So if we're thinking if we just wanted to look at briefly what types of interventions is India uh adopting to help achieve these twin goals. Well, first off, solar has been a major target of policy interventions and this is due to the fact that India has historically been uh extremely reliant on imports of Chinese uh solar goods uh to achieve uh various solar targets. Uh so these interventions include local content requirements uh which is that a minimum share of uh various products must be uh produced uh domestically in order to satisfy certain conditions either to achieve subsidies or to qualify for certain auctions. Um

7:51 we also uh there's also production linked incentives again tied to local uh production. Um there's also been lists of uh approved models and manufacturers which give a leg up to local firms. Uh we've also seen other sectors such as electric vehicles, hybrid vehicles, green hydrogen and others begun to see incentives for domestic manufacturing. Um and if we look at the policy interventions over time, they are growing. And this is uh a figure from the the white paper where we're tracking the policies over time just on China's clean energy products uh by category. And uh one thing I'll note is that various import policies um are significantly growing in recent years.

8:39 So tariffs um are a very important element of these policies and they are particularly high for electric vehicles and for solar. Now EV tariffs uh range um up to 125%. This is true across con uh conventional vehicles as well but EVs um face uh very high barriers to entry. Um solar components have also faced pretty uh uh ramping solar tariffs over time. And so just plotting those components. Um one thing you'll see here is uh that um over time we've seen uh particularly the solar PV module which is the final assembled component go from a very low tariff level to a very high tariff level. uh so taxing the final uh

9:28 uh final enduse product in the hopes of bringing more of that assembly um and and eventually upstream uh manufacturing uh to to India. So our effort here uh broadly what we're thinking doing in this white paper and also where our continuing efforts are is to understand a few things. uh one is to establish a baseline of how the intermediate and final goods of these clean type products are traded between India and China and the rest of the world and what what types of policies is India using to diversify away from China. Uh even this baseline of uh data sets is still relatively lacking in the broad academic literature and and and uh and and public domain. Uh two is to

10:14 explore all the available evaluate the available data sets that have been used and we're very fortunate to have on this call some uh scholars who have used uh granular data sets to investigate the effects of trade policy and three uh develop accompanying research questions and what are the most relevant policy and research questions for facing India's policy makers as they try to meet these twin goals. uh briefly we have more details in the paper but here's a here's a brief uh table of some of the selected data sets and papers that we examined for this report uh there are quite a few different databases out there that collect data on a variety of scales one thing that I will just height here highlight here is that uh there is a

11:01 significant uh common use of UN uh com trade data so this these sort of globally traded data sets um at a certain HS6 code level and we'll be using some of that here in this talk but also there are significant gains to be had by collecting the directly the customs data from Chinese customs and Indian customs agencies to get more granular product level that we can get at the component level. Um and in addition we we've collected uh assembled a a pretty large policy database as well of India's um combining together various resources of India's uh trade um and substitution policies. So the the top line here is that the China to India

11:46 clean energy trade has gone through wild swings and is under increasing pressure as a result of these interventions. Um and I think there's some really important policy um and research questions here. So first off if we go back to sort of the earliest phase of local content requirements in solar 2014 to 2017 uh over this time we saw India actually dramatically increase its imports from China um in solar uh goods and then um in the later phase when there was greater import taxes as those were increased and then additional local content requirements and policy interventions we saw a steep decline in solar imports from China um but then growing post postcoid and then to the more recent imposition of even higher import taxes in solar panels. We now we

12:33 saw this uh really large seesaw pattern uh where we're seeing you know multiple times differences over over a span of few years in terms of the import value of solar. Other goods are more steady over time because the pair of policies is not have not been as variable. And importantly uh by looking at some of these component levels we can also examine uh intermediates and so India is uh has been a large importer of intermediate PV goods in particular PV cells for for assembly into PV modules. This is a place that uh Azion Southeast Asia has also taken on as a role as it imports PV cells from China assembles them in the modules and exports them uh to other countries around the world. uh

13:19 India has also uh played this role though it's increasingly trying to move away from uh even importing those PV cells and trying to move further upstream um and then at the same time we're also examining how uh India's exports have been picking up in wind and solar um and you'll notice here the purple line is solar uh we saw over this period um increasing tariffs on China as well as a scrutiny on China inputs from other countries notably Southeast Asia as China uh for as China's intermediates go to assembly uh manufacturers in Southeast Asia for export elsewhere. This has increased the the attractiveness of India. But it is really important to note that in 2024 97% of solar exports went to the United

14:07 States. So it's a very heavily dependent on uh currently on the US market which as we know is highly volatile in the current administration. So the policy and research questions that we're interested in getting into and what we have an excellent panel here to discuss is first is uh what are the relative effects of trade policies um considering tariffs versus industrial policy subsidies or incentives on clean energy trade. Um second is how is India balancing this tension between rapid deployment of clean energy as well as its goal of building indigenous manufacturing. Um third is what can we learn from local content requirements uh from other contexts including China and the development of competitive um

14:53 indigenous industries and then uh more forward-looking which sectors is India most likely to gain global manufacturing footh where is the potential competitive and comparative advantage for for India and what is necessary to accomplish that so I will close here um and uh the white paper can be found on the india.usd.edu edu web page and I'll pass it back to Caroline now. >> Uh thank you so much Michael for that excellent and very clear presentation of what's happening in the solar industry around the world and especially in India and China. We have an outstanding panel of experts to reflect on this research and also help us to understand the key

15:38 questions that you raised. Um I'll first introduce the panel and then move to questions. Professor Shrethgar is an assistant professor of economics at the University of Pennsylvania. His researches at the intersection of industrial organization and development economics. In his recent work, he studied the solar industry, the cement industry and agricultural sector. So he he's very well well placed to talk about this work. Um Rhys Sha Jane is senior program lead at council on energy environment and water in New Delhi. His expertise revolves around critical minerals and renewable energy deployment supply chain and manufacturing. His work

16:26 he has worked with major business governments and is supporting various indian ministries for the G20 energy transition working group. again perfectly placed to discuss this. Dr. Ilaria Mazoko is deputy director and senior fellow with the trustee chair in Chinese business and economics at the center for strategic and international studies CSIS in Washington. She has extensive experience researching industrial policy, Chinese climate policy, and the intersection between the energy transition and economic national security. And finally, Peter Wooders is a senior sustainable energy expert and co-founder of the Geneva Platform for

17:13 resilient value chains, an NGO focused on helping reduce clean energy supply chain risks and issues. He was the first director of the energy program of the international institute for sustainable development. So as you see we have China expertise, India expertise and solar uh and renewable expertise. So so excellent panel. So I'm going to invite each of the panelists to provide introductory remarks and to include reflections on some of these key questions raised by the research. So, and I I apologize if I'm not pronouncing your name correctly. Uh, first Shrek, is that correct? >> Okay. >> Yes. >> Um, help us understand the policy and

17:58 market drivers of trade patterns. What are the relative effects of trade policies, tariffs versus industrial policy on clean energy trade? And I'm going to make an aside here that as a trade economist uh my advisor was Jagdish Badi. So I won't say that my my views are are are very far on one side which you can probably guess on this but I'll be curious to hear what you have to say. Please go ahead. >> Thank you Caroline. So let me start by going over some empirical evidence we have on how paid policy and subsidies directly shape paid and renewable energy and then I'll talk about some conceptual issues.

18:43 Okay. So let me start with this paper. So this is joint work with Saga Senna and in this paper we are looking at the Indian solar module manufacturing industry. So on this graph I have two time series plots. The one in blue is the market share held by foreign producers and these are by and large Chinese producers. The red line are domestic producers and this vertical black line is the first date in which import duties were implemented and as we can see this this policy was successful in shifting market share from foreign producers to domestic producers. Now of course this was somewhat successful in onoring that's not always the case. So

19:30 it obviously depends on how these policies are designed. So here I take an example from the US. So this comes from Ballinger at all and they are looking at the US trade policy in the same industry. Uh in this graph we have three kinds of firms. The firms the the data in red are firms that are based only in China. The data in blue are firms that are based in both China and rest of the world. So you should think of these as firms which are headquartered in China but may have production facilities in other parts of the world. And in green you have firms that are outside of China. And if you for example look around the 2014 line so this is when uh major revision in the tariff policy

20:17 against China and Taiwan was imposed by the US government. you see this shift of trade from firms that are based only in China towards firms that are headquartered in China but may have production facilities elsewhere. So again this this tells us that trade policy can be successful in shaping manufacturing patterns can be successful in shaping uh trade patterns but it really depends on how the policy is designed. So that's tariff and trade policy. Coming to subsidies, we don't have as much work thinking about how subsidy polic subsidies affect uh manufacturing and trade patterns. So for this I have used data from or a figure from the ship building industry. But I think the the findings here should be

21:02 qualitatively similar. So this is the global ship building industry which is dominated by four players. So you have China, Europe, Japan and South Korea. Chinese government started subsidizing the ship building industry starting in 2004 and what we see is right around that time the industry takes off and it takes a lot of market share from other dominant players in particular Europe. So so all these three examples illustrate that both tariff policies and subsidies can be used to shift trade patterns. The question is what's the relative costs and benefits of these two instruments? So if I were to sort of classify these two policies and think about the welfare effects, we we should think about three players that a

21:48 domestic government might care about. So it cares about itself. So think of the fiscal revenue or the fiscal outlay associated with these policies. It creates cares about domestic consumers and it cares about domestic producers. If we start with tariffs, tariffs are good for the government because it generates revenue. It's bad for consumers, increases price. This is good for domestic producers because it reduces competition. Production subsidies are the opposite. So they are bad for the government because it has to pay those subsidies. Good for consumers because it tends to reduce prices and good for consumers because it's a fiscal transfer. So both of these policies have uh different trade-offs. And just to just in the in the paper I have with

22:35 Saga, we sort of characterize what the optimal policy is in if you want to expand domestic renewable manufacturing. And what we find is that the optimal policy really depends on what your objective is. So if you want to achieve a small expansion in the domestic industry, so you want to expand your industry by a small size, tariffs alone are sufficient. So just rely on tariffs. If you have a large ambitious target, maybe you want to combine both tariffs and subsidies. So this tells us depending on what our target what the policy should be. Now what the target is of course depends on the country and the industry in question. We run our analysis for the Indian solar industry. There we find the target to be 8%. So if you want to expand your industry by less

23:22 than 8%. Just use tariffs. If your goal is anything larger than 8%, you you should be combining both these policies. The Indian government definitely has goals above 8% and that that is maybe why we see a combination of all of these policies being deployed in the sector. In the last couple of minutes, let me talk about some more policies that we see governments using. So the first one which Michael already talked about are these domestic content requirements and this this is essentially pol this is a set of policies which require solar plants to use domestic modules. So we use data from 2016 to 2021 to figure out what the impact of these policies are. And what we find is that these policies

24:09 increase prices that these uh prices that solar plant developers charge by roughly 10 7 to 10%. So these are not costless policies. These do increase downstream prices. So we can put these in the framework that we had before. So we just add a third column. DCRs are great for the government because they don't require any fiscal outlay. They're bad for consumers because as we just saw they tend to increase prices. They're good for producers because it increase the they increase the demand for their product. We don't have results which so we have results which combine tariffs and subsidies. We don't have results which combine all three. That's maybe something for future research. Let me

24:55 just end with uh mentioning a couple of other policy instruments that we see governments using when thinking about industrial policy and this comes from a paper by Barick and co-authors. So they look at a bunch of policies including the ones that we have already discussed but in addition they have these two additional instruments. So these are investment subsidies and entry subsidies. Investment subsidies. You should think of these as subsidies given to existing incumbent players to expand capacity. And entry subsidies are subsidies given to new firms who want to set up say new manufacturing plants. And one of the takeaways from their paper is that entry subsidies can potentially be wasteful because the kind of firms that

25:41 they attract are these marginal firms who are induced by these subsidies to enter the industries and the these might be small inefficient firms. Production and investment subsidies are better because they are well targeted. They tend to go to these firms which are already present which have already shown that they can survive in this industry. So these are production and investment subsidies by design are well targeted. Of course we need to care about concentration and market power as well. But this gives us one one uh additional mechanism that we need to keep in mind when designing policies. So let me stop here and happy to take questions if any. >> Thank you. That was excellent. I think we'll go through all the presentations

26:27 and then take questions. But while we do I'll say I I was thinking about the policy China used which is you know foreign direct investment joint ventures and technology transfer. So maybe just think about that um or maybe some of the others will talk about that. So next to Rishab um help us to understand the interactions among trade policy prices and deployment. How is India balancing the tension between rapid deployment of clean energy technologies and its goal of building indigenous manufacturing capacity? Thank you. >> Thank you Tolene. Thank you Tret and Michael also. Um fantastic presentations and discussions. Couple of things that I

27:13 would want to highlight. Of course, Shisha and um even Michael had have already put out a lot of analysis and very interesting information but um India has been trying to support or build domestic solar module cell manufacturing capacity in the last 15 years. So it's not very recent trend. uh we actually um started working on setting up solar cell manufacturing if I remember somewhere around 2008 2009 where the Chinese cell manufacturing was also very nent at that point in time and there were companies that had ordered machineries mostly from Germany uh to start manufacturing cells in India unfortunately around that time and after the global recession itself what happened was because there was so much focus on manufacturing in China it was

28:00 like a hockey stick in terms of what China necessarily wants to manufacture and of course solar was one of the sectors that they really wanted to focus on and then at that particular time there was no possibility for any country across the world to compete. So there have been instances where companies had ordered these machines but they did not necessarily have the money to even unpack it. So for 5 to 7 years there were machines wrapped in plastic lying in warehouses um cell manufacturing just there because it was it did not even make sense for them to give the last branch to the machinery operator who would come and then train these people itself. So many of these companies um had gone bust uh itself. So but beyond that what we saw was the the India came

28:46 up sorry I'm giving a some context because it is helpful and why we why are we here and what has our learnings been and then around 2010 India came up with the national solar mission the focus there was completely on deployment it did not necessarily talk about manufacturing significantly it said that we need to install uh 22 gaw of solar by 22 itself uh in 2010 of course we have achieved way more than that Um and then to do that the the solar module cost um and given that manufacturing did not necessarily exist a lot of those solar module came from um China and actually from America and what we did was because there's so much manufactur so much um incoming module that was coming the first um uh barrier that India

29:35 implemented was not actually I it was DCR with a twist where it said that DCR is only required ired for crystalline solar module. So there was no DCR that was required for thin film module and India around 2010 to 13 was the country which had uh the ratio of crystalline to thin film completely opposite what existed across the world. So majority of the modules that were deployed in India were completely uh thin film because the domestic manufacturer said that you need to have you need to focus on uh you can only give you can allow only non non crystalline products. So we saw that so there was a loophole in the policy which meant that a lot of the thin film modules started coming in. Then of course there was in WTO we lost the case with us in terms of DCR. So DCR was gone. But then what we started seeing

30:22 rapidly until 201617 was significant reduction in prices and that of course led to all the manufacturing uh shutdown in Europe and other parts of the world and this then led to so much rapid deployment of solar. So we recently we crossed 108 gawatt and thanks to the reduced prices of solar modules uh the lowest we achieved was 1.99 Indian rupees per kilowatt hour that is unimaginable for Indian policy makers and that was always considered um uh a great point in India's energy transition such low tariffs but at the same time uh the Indian manufacturers were struggling this is before covid and so India implemented anti-dumping they there was investigation But no implementation of anti-dumping duty but there was a safeguard duty that was implemented

31:08 couple of years again there were loopholes did not necessarily materialize because there were countries where we had signed FTS but it was only after CO and I want to stress on this it was only after COVID when across the world including India the government realized that we have to do everything to support domestic manufacturing and we have to close loopholes wherever required and that is where there are three important policies some of course have been discussed one is we have basic customs duty very high 40 and 25% on solar cells and solar mod solar modules and solar cells we had ALMM I think ALM is the reason why we have domestic manufacturing it's not tariff it is not uh the the subsidies it is not the production linked incentive scheme which is the $3 billion support that has been

31:53 given to Indian manufacturers the only reason is ALMM and now what is ALMM is basically a DCR policy which says that any module that will be sold in India needs to be ALM certified while it is a certification mechanism essentially it says that unless and until you are as part of that uh you'll not be there so I think it's a mix of different mechanisms but uh the the local mod local content requirement was the biggest winner >> uh thank you so much for that excellent context um you know you raised a number of issues including taking into account China's response and the price trajectory in China because tariffs may work but if China's price is falling

32:40 extremely fast they stop working and you end up with all this idle capital and also the importance of regulations and standards in these industries uh where they differ around the world and whoever sets the global standard has an advantage and setting your own standard can can really hurt you. That that was great. So next to Aria um help us to understand the effectiveness of local content policies. How effective are local content requirements in supporting development of competitive indigenous industries and their vulnerability to trade disputes and what can we learn from China's experience? Thanks. >> Yes, thank you. Um and before I do so, thank you for having me on this excellent panel and also congratulation

33:27 to Michael and Tat and the rest of the team. I mean this is a very interesting paper uh super interesting project. I'm looking forward to reading more. Um and let me just say this is a very dynamic area. The India China relationship when it comes to clean energy and India's experience with industrial policy and uh developing its own clean energy is is definitely something that's moving very quickly. I think we should all be paying attention to. So, um, commend, you know, I would like to commend them for picking the topic and for working on this. Um, in terms of, uh, local content requirements, which I think everybody has been sort of pointing to and and and and bringing up, I think the paper points out that this is, you know, that the results have been very mixed, uh, in India. Um, and I think that's true for most countries um, globally, right? And

34:15 a lot of countries have used local content requirements um, in clean tech and also other areas. um you know Brazil, United States, Indonesia, China and I would say you know that it's clear that this is a tool that theoretically can be very useful uh in some cases has been very useful but it's clearly not sufficient in in and of itself to achieve um you know the development of a new industry or uh upgrade u an industry itself. Um in some ways I think it's could be comparable to tariffs right where having only tariffs and no other policy um can be limiting I think to uh the development of an industry and and certainly in solar I think we've seen that to a certain extent now if we do look at different countries different elements that seem to be important are

35:02 policy continuity uh that's certainly something that's been very present in China and I think certainly been very you know something that we'll be looking out for in the United states a case study pro perhaps for the future now that the you know parts of the inflation reduction act have been um uh you know overhauled and uh and and so that's going to be so that's certainly an important signal for investors if nothing else right that there there are going to that the incentives or the the requirements are going to be in place for a certain uh uh amount of time. The second element is that demand needs to be quite strong. So local content requirements only really work when you are leveraging your internal market. Uh right. So if you are a very small country with very limited demand, it's

35:49 going to be very hard for local content requirements to actually work. Um now India of course has this potentially huge market. So it could potentially work very well. But that requires you know sort of continued leverage of this uh growing market. And that's something that China of course did very well. uh local content requirements were used uh most extensively in um the wind industry very early on in China uh in ways that I think most would say were fairly successful in attracting foreign direct investment. But I think the third element that's really perhaps the most important one is that you need to have an ecosystem that's uh going to be responsive enough in scaling and reducing costs and manufacturing. If you don't actually have a manufacturing base or the capabilities or the companies

36:36 that are going to be responsive uh then it's going to be quite difficult to create sort of uh to to you can't just will an industry industrial production out of nowhere let's put it that way right and so that's really sort of a from I think conceptual standpoint another important element uh now of course the India has various elements of these uh of these um things but they they still need to work in together because of course I think as as the previous panelists uh have pointed out, you know, there are costs attached to this, right? And there's there's a cost differential and there's a real question of who's going to pay for that cost differential, right? You know, who are the consumers? Uh who, you know, and what are the targets ultimately of of this policy, right? Is it um a cost differential that makes sense for

37:22 geopolitical or national security concerns? Is there sort of a long-term industrial development target? And if that's the case, then what is there a date by which if you haven't achieved it, you give up on it, right? Um and so I think there's these are all sort of difficult questions for policy makers to keep in mind. But I think it's worth me mentioning. I think uh Caroline, I want to thank you for bringing up FDI and joint ventures in China. Uh because it in some ways again some somewhat similar to you know in some ways this is part of the local content requirement solutions, right? You could have local uh the localization of foreign firms. Um and this has had even in China if you look at the automotive industry uh right the internal combustion engine industry it didn't actually work all that well for China uh you know until the EV

38:09 transition China really wasn't an innovator when it came to the automotive sector uh despite having plenty of joint ventures and foreign direct investment from foreign companies. So I think that's sort of a a a warning sign that even for China these policies have have worked only in very specific conditions and and are worth uh uh sort of analyzing more closely this is something that um I've been repeating a lot in Europe where there's a lot of enthusiasm about technology transfer through joint ventures right and I think it requires a little more than just having a joint venture uh you do need to have a broader ecosystem that's actually sort of enabling uh that uh the fusion of of of technological um of of manufacturing knowhow and and all the other things that actually are enabling sort of scaling and and the

38:54 cost advantages. Um so I think um I I'll I'll leave it at that. I will just note yes there uh one last point is um you know the global reaction to this and I think we are very much in a sort of a global governance influx on trade. Uh and so I think you know there are certainly a lot of these practices uh were far more problematic a few years ago um than I think today you're seeing much more of a proliferation of of these policies. Uh and it's not clear that the WTO or other um institutions are necessarily well equipped to address that. Um and I think you know more broadly there's probably going to have to be at some point some recognition that a new sort of uh governances or agreement across countries of what is acceptable and what isn't acceptable uh

39:40 will be necessary at some point but I'll leave it at that. Uh thank you very much and you raised so many important uh points especially I think about the continuity and predictability of policy because that's one of the features of China that has worked so incredibly well is having policy that stays in place is predictable because you're not going to get an investment response if polic if you don't know what policy is going to be uh in place tomorrow which is certainly a problem in the United States right Now I think also the market size and demand and there's one additional thing I would want you to think about which is I've I've read that in China one of the things that's worked really

40:25 well is creating competition among the different provinces and I don't know if India has thought of doing that but um maybe they're you know they have all these interventions so they're protected from the rest of the world but there's they're such a big market they have that but they also can create that kind of internal competition and lots start but only only the best actually end up end up growing. So uh great great discussion and thank you also for bringing in the multilateral system. I think you were very polite about the WTO and I think it certainly is not in any shape to address these issues and hopefully we get something new. Um finally to Peter, help us understand India's global

41:12 competitiveness in clean energy manufacturing. So this is really critical because if you incentivize an industry where you have no chance of being competitive, you're just throwing all that money away and consumers are suffering. So in which sectors is India most likely to gain a global manufacturing foothold? What's necessary to accomplish this? Um please uh over to you. >> Thanks very much Caroline and and also to the paper just to you know highlighting this China India relationship which I think doesn't really get the attention it deserves. Um I think the first point I'd make is you know how different is India to other countries of the world at the moment and

41:58 you know when we look at the clean energy the major clean energy sectors let's say you know this is effectively solar wind uh critical mineral processing batteries and EVs now if you're almost any large country in the world with as we've noted noted here today a a large domestic market giving you you know space to to enact some policy to to drone industry and so on. What are you seeing at the moment? You're seeing uh incredible competition from Chinese manufacturers. Yeah. The the capacity is very high. The capacity to export is very high. Prices are low. Prices in um solar for example in the first half of this year for most of the major Chinese manufacturers. So sort of the big 10 if you like who are the

42:44 biggest 10 in the world in manufacturing terms. uh in in very simple terms they're not making money at the moment. You know there is so much competition as you referred to Caroline there with the uh interprovincial competition with the availability of loans and finance and refinance mechanisms and so on from different provinces from different local governments in China that it's created a situation where we effectively have very very large capacity and people selling at cost. So the barriers to entry for any country are very very high at the at the minute and I think again sort of following this theme of you know is is India very similar to other countries again you know what are you trying to do in these industries first you're trying to secure your supply of the goods in

43:30 the first place and I think for India in critical minerals that's the stage it's at it's firstly to make sure that there is enough imports following that you you're then looking to produce as much as home as you can across the manua facturing supply chain and I think one of the factors we haven't pointed out today is you know when you look at for example the solar manufacturing chain that goes from polyilicon to wafers and ingots to cells to panels India has basically zero production at the moment of polysilicon and wafers and ingots it has about a quarter of what it needs in cells and it's getting towards self-sufficiency in panels it's not a dissimilar situation to the US um US is a bit more polysilicon but also it's in um in the other intermediate stages. So

44:17 you are reliant on imports of those intermediate inputs which can be fairly finished products. You know in some cases when we look at a cell that's 2/3 of the value of a panel. Yeah. If you can then do the the wrapping around and the encapsulates and the the structures and so on you add another 20%. The assembly is another 5 10% after that. So um again India is in a similar position to a lot of the other countries in that it's it's at the end of the the value chain it's looking to build up its domestic manufacturing it's hoping that will then lead to exports and I think one thing we haven't perhaps looked at enough today is given these huge barriers of entry but given that also the countries around the world want more supply chain diversity they want to be

45:04 buying from more sources they want more different routes That means that there is considerable incentive for companies to be set up in India or other uh countries around the world with investment from India or from other countries from the world or around the world or um or both uh to you specifically to be more diverse than the current market will supply. But that more diversity will come with extra cost. And as was noticed noted by uh previous speakers, somebody has to pay that extra cost. So if we want more supply chain diversity, we're somebody has to pay for that. Is that government? Is it consumers? Is it a combination of the two? Um some good experience there from the US solar panel industry. Um

45:50 which solar panels in the US have been 20% more expensive than the rest of the world since the tariffs first came in in 2012. you know in simple terms they're paying for diversity i.e. local production. Um where does this lead us? You know where could India be um competitive going forward? I think it's already competitive in wind and in many of the components that required in that the gear boxes um and some of the other elements and is exporting to Europe and to other sort of major advanced markets. Uh it's got in relative terms a large solar panel industry compared to other parts of the world. And now it's got a national mission for critical minerals and is looking to build up through that and there are resources and the ability to to set up processing plant uh there.

46:37 But I think I think we have to change our mindset a little bit and say you know if you want to get to a position where you're competitive with the market i.e. Chinese producers, you might be waiting a very long time. And industrial policy in the past, as Ario was Ari was mentioning, you would put in industrial policy with the with the idea of setting up sustainable firms within 5 10 years or whatever it might be. I think we might have to wait a lot longer than that now and maybe we don't even we never get there. Um and so if we want our diversity, you I think we there's a different way here of looking at success. If you know if there are parts of the market that are willing to pay premium for diversity for local content for whatever then that's what you countries like India can aim at and

47:22 other countries to to be thinking you're going to be purely competitive with China is is a big you know it's a big ask and it's going to be very very difficult and then we see you know there are opportunities that come up from time to time in the market and and as noted um India's been importing panels recently, last few years, and exporting panels mainly to the US to take advantage of it having a lower tariff than its main competitors. Um the huge tariffs that went on to some of the Southeast Asian countries recently on solar panels um still gives India an advantage in this place. So there may be opportunity as well to sort of work around the tariff game and see where there's possibilities of going into countries with high tariffs.

48:09 >> Great. Thank you so much, Peter, and for really pointing out the excess capacity in China and what that means for trying to be competitive in these industries. One of the questions that came up in the chat was exactly about what you leaned into, which is um the value ad as opposed to looking at ex uh exports and imports. And what I heard from you is that there isn't a lot in solar, but there is in wind. Do you have a sense of what it is in wind and other industries? Just staying with you for a moment. >> Yes, certainly. Um I think the same general point applies that Chinese competition in all of these goods in all

48:54 of these sectors is very very strong and that if countries want to build up their capacity they may have to use protective measures as well or set up premier or whatever it may be. Um there's a lot of intermediate components where India is strong um in terms of um you know the gear boxes some of the pitch equipment sort of good mechanical electrical electronic engineering um across wind and I think that goes generally for a lot of countries and a lot of companies in the wind sector that there are opportunities sort of away from the very high-tech side of this uh which companies can exploit Great. Thank you. Um the second question in the chat is about environmental

49:40 regulations on clean energy um in China and India. And of course having environmental regulations also raises the cost and encourages investment when you're a big market like China or India into those sectors. Um has anybody thought about those and their effects and want to comment on that? >> I can quickly come in. So couple of points uh one in India at least specifically I'll not talk about China there's enough that is already said in terms of the impact on environment on some of these specifically in China but in India what is happening right now there's a lot of focus on domestic module manufacturing which is also very assembly kind of

50:26 thing there's mostly uh it's a it's a fully electrified facility so in terms of if your source of electricity is fairly clean which it can be and most of these companies are using clean power from the grid then there's very limited environmental limitation there's not lot of utilities but for cell and then after wafer ingot polyilicon there are a lot of utilities like water uh air because these are very energy intensive processes and I think internally how the country works for any manufacturing to come in there are certain um norms that are set by the pollution control boards in that region so like any other industry they need to meet those regulations and if they are within the limits they'll be able to operate. So there's no specific or any relaxation

51:14 that is given to solar manufacturing or even recycling and sometimes those are also barriers for entry in manufacturing in India unlike in many other regions in China also where we have seen some of these regulations are not necessary and those are something that manufacturers often keep talking about that how how do we relax these because it is making us difficult with so many regulations to be competitive with uh with our counterparts interaction Yeah, here in Southern California, we apparently have um a huge deposit of lithium, but the environmental regulations are such that it would not be cost-effective to to extract it. Um so very related to this topic. Um the next question is about uh the effect on

52:04 the grid. Um, and I thought, uh, Michael, you might be able to talk a bit about this with your engineering background and, um, what kinds of demands solar is good at at filling and how it affects the grid. >> Uh, sure. Yeah. I think that the in the long run, India is going to have to deploy a large amount of battery storage to make the solar work. In the short run, I think it's premature. I think where where f where generation shares are in India and China and many other economies, uh batteries are not that necessary to integrate solar. But I think it really points in the long run that most models

52:49 show there's a high correlation between solar and battery deployment as we get closer to net zero. So I think this really points to how India is going to be able to build up its own battery supply chain uh distinct from China. We didn't show the statistics but China is also 80% of the global battery module market. Uh upstream even higher if you look at some of the cathode anodess other materials graphite etc. I think that's going to be the sort of the next frontier if we think about where um where some of these clean manufacturing targets are going to have to really bite and that plays into grid storage but also to electric vehicles um where electric vehicles by some estimates is going to be 10 times the storage requirements of grids as we go out a few

53:36 decades and so there's a lot of um potential policies here that um India might be trying to uh deploy can learn from on the um uh from some of these earlier cases in solar. >> Excellent. Thank you. And the last two questions I'm going to combine which are about circularity and um especially as we're thinking about competing with China. Maybe given that China's so far ahead on the kind of original critical mineral side and manufacturing side, there is a competitive edge to get in on the recycling reuse side for other countries which will be critical for the future. So it's kind of innovation uh in that

54:24 sense. So so how do we think about that? So let me turn to Rishab who has his hand up and then um that'll be the last question since we're coming to the end and I'll give you all a moment for any closing remarks as well. Thank you. Uh Carolene, just quickly unlike manufacturing where it may happen typically wherever the costs are lowest, it's impossible for recyclers or even it's it's very difficult for the modules basically of the largest size to go to the same place shipments because of the cost emissions etc. So anyways the the recycling and it may be a very small sector anywhere in the world has to happen domestically um at whatever scale and there's you do not necessarily need

55:10 a lot of huge quantity to recycle. Now there are two challenges with that. One, most of the modules or a lot of these technologies including EVs, batteries are not designed to be circular. So they it's very difficult and it's a very energy intensive process to actually take out the minerals and what you get is not necessarily the best what you would want. So how do you very important aspect how do we nudge manufacturers which then increases cost to design keeping circularity. Now in India given the scale of deployment that we are seeing there's a huge potential already because we lose products in manufacturing in transport uh during uh installation and then of course end of life and there's we have already seen critical mass because the concentration

55:55 of deployment in few states. So there's enough that already exists. Now this is something in terms of the evidence and we have found a number what those numbers are but there are certain regulations that need to be updated like the EPR extended producer responsibility whose responsibility this is what are the minerals that will be can be recovered which are the credits that you can claim now some of these are in very nent stage in India and sometimes across the world and I think there's enough discussion that is happening in India at this particular moment and CW is very proud to say that we have been leading some of these narratives on circularity is what do we necessarily now do and where where are what is the role of different ministries and also at the state level municipality level how

56:42 do we support the as uh the the circular circular aspect um itself so it's a complex process because there's a local pollution control boards that are involved there are these manufacturers there are these collectors the developers the traders everyone is there people need to figure out who's who's responsible for what because we are talking about 25 to 30 years. >> Thank you so much. Um I think this has been really an incredible discussion and shown both how complex these issues are, how many of the policies have unintended consequences and how costly they can be if if they're not successful, but how important they can be, especially with renewables if they are successful. So we certainly need more work here. Um, let

57:29 me go quickly just around the speakers if anybody wants to say anything and then Trot hasn't spoken so I want to make sure he gets closing remarks. So, let's go in reverse order. So, I'll start with you Peter. Any anything you want to add? >> Thank you. Two very quick points. Firstly, let's not forget that this is ultimately about climate action, these clean energy supply chains. So, we want as much solar and wind to go in, as many EVs to be built. Although countries also want local manufacturing and supply chain preferences, we need the climate action and I think that leads as well to uh the situation we don't want here is very strong industrial policy competition at national level. So where can we look for collaboration in terms

58:15 of regional industrial policy in terms of global industrial policy in these sectors and what are some of the compromised solutions that might work there? for example, you know, outward investment from China, bringing jobs to countries um while transferring the technology as well. Of course, that depends on attitude and and willingness, but you know, there are some compromised solutions out there. >> Excellent. Thank you. Important point. Um Aria, >> um I I think Peter said made some brilliant points there. I I will just add that I think we've talked a lot about solar. We talked a little bit about EVM batteries, but I think you know moving forward it will be interesting to sort of see on batteries and on next generation technologies, how these sort of you know tensions between

59:02 climate uh priorities, industrial policy priorities, but also you know the synergies between this, how this all plays out. Um these obviously being you know batteries being far more strategic from a national security standpoint as well. Um so I think that those are just going to be really interesting topics and I'm looking forward to um following the the team's work on this. >> Thank you Risha. >> Yes. So I would say for the last I mean until 2024 we were talking about manufacturing specifically for local jobs as China plus one diversification and local value add. But I would say in the last 3 to 6 months the reason to build domestic manufacturing has completely changed. We have seen what has happened to India right now and we have been put on tariffs because we are dependent on oil from Russia. So this

59:50 means that tomorrow for any geopolitical conflict between two countries where India is not necessarily party two you can be penalized a country independently India can be penalized. potential conflict between India, US and China or any other can say that because you import so much solar modules from China, I would put a tariff tariff barrier or whatever tariffs on you. So now it's not only between China and India which was always the case because they are not necessarily your best friends but a third country and a very important partner has put so everything is now um vulnerable and not just them but China because they've recently put a ban on rare earth magnets. So you were we were dependent we did not necessarily build an ecosystem the magnets are very costly we have the technology but manufacturing

1:00:36 but then secondly suddenly it's cut out and the auto sector in India is the largest one of the largest contributors to India's GDP so a small magnet can have tremendous impact on India India's economy India lacks and lacks of jobs so I think beyond all of these including competitiveness so if we have to even pay a a premium on solar modules that premium the whole price is still very less than coal. So we have to start comparing not what is the benchmark price of solar modules across the world but a benchmark price which is typically lower than coal and any other gas and then say that even if it is manufactured in India a technology that may not be the latest it's okay and solar module that was working that was made in 2023 with the technology will still work for

1:01:22 25 years. So it's okay we don't have to worry for the latest tech. We should make peace and then focus on energy transition but maybe in a way that we are reliably comfortable that okay in 2030 whatever may happen in the world we can deploy solar modules in the country. So I think that thinking has now happened and that is where the government will also be doubling down. >> Excellent. Thank you for bringing in the geopolitical risk and the uh unfortunate high tariffs on India. Uh Shrev. Yeah, let me briefly talk about joint ventures and I guess uh Aria had some comments about the Chinese automobile industry and how joint ventures were uh how joint ventures impacted or shaped that industry. So there's this uh interesting

1:02:08 paper by Gia Bay and co-authors and they look at what impact this had and what they found was that while it may not have led to at least during the ice uh the internal combustion engine age, it might not have led to Chinese producers becoming global leaders as they are in the in the electric segment. It did lead to those firms improving their quality. So there was some learning going on and the mechanisms that they identify are one there is some employee learning going on. So these employees they work in these factories and then they move to other factories and that's really beneficial and the second thing is that having these joint ventures bring in global suppliers who supply to these factories and and Chinese domestic

1:02:53 manufacturers can use these global suppliers. So I guess I would say that there is definitely a role for using joint ventures to promote domestic manufacturing. >> Thank you. Um so we've we've had a great discussion about uh the need for more cooperation in these important areas uh decarbonization being critical for the world geopolitical risk and then the the tension also with jobs. So so there's a lot of different goals trying to be achieved with these policies. TRA, the last word over to you. >> Thanks, Carolyn. I just wanted to take a moment to thank everybody. I think uh the unenviable job of summarizing the whole panel, but I'll try to do that as quickly as I can, which is I sort of saw three main themes emerge from this. The first being that the geopolitical uh

1:03:41 tensions that uh existing, reforming, amilarating over time are going to rapidly reshape what the business environment for domestic manufacturing uh in India is going to look like. And this is going to come in the form of both opportunities for Indian manufacturers but also challenges through third party conflicts as we as Rishop was pointing out uh has taken place more recently. In the context of this, I think what we really need is, you know, the kind of work that a lot of the people on the panel have been doing, uh, what trait was alluding to that there's that the impact of these different policies while, you know, sort of from a theoretical standpoint might be similar, the actual uh, pragmat the actual implementation of these policies because of the way existing industries are shaped because of the way challenges are uh, interactions are happening

1:04:27 across national borders either through joint ventures or through uh, you know, retaliatory measures that's going to mean that the domestic policies that are implemented are going to matter quite a bit and I think alluding to what uh both Peter and Rishab and Allaria were saying which is that the actual capacity of the domestic market even beyond P energy just the general uh competitiveness of the manufacturing sector is also going to play uh an important role and I think finally um I just taking cue from the panel was that we need to just rethink what a win in this setting looks like. I think that to me really struck out as one of the best uh arguments for how we're going to rethink and think about this agenda uh going forward which is it doesn't necessarily mean a price market competitiveness the innovation that

1:05:13 China is doing not just you know it's not just the manufacturing superiority that China has but they're also uh the leader now in patents uh around uh around a lot of the solar deployment and I think that ability to create that innovative environment for the next generation of technologies might be someplace where India might look for comparative advantage. Uh I just want you know we're about five six minutes ahead of time already. So uh I just want to thank our panelists. I want to thank uh my co-author and Michael uh for uh leading the discussion and of course Carolyn thank you so much for moderating uh this panel and all of these experts. Uh for more information please uh you know feel free to meet us at our website on the 21st century uh India center where we will post this entire u uh video. Thank you. Thanks everyone and I look forward to

1:05:59 continuing the discussion on these important topics. Great discussion. >> Thank you.