Page 15 - Issue 61
P. 15
Vol.1 Issue 61 November 2023 ELITE
emissions by 0.3%-1.8%, according to a study Though such a scheme might encourage green
published in the Environmental Impact transition in the US, it threatens to slow and
Assessment Review in January 2023. And not raise the costs for the net zero transition on a
only do barriers to trade raise costs and increase global level. Recent research by the European
Central Bank (ECB) has found that the IRA
emissions, but they also make it harder to cope
could slow the green transition at a global level
with climate change and curbs efforts of
as foreign firms lose economies of scale as they
adaptation. According to a report published by
lose access to the American market and have
the World Bank Group in 2021, stronger export
few alternative markets to sell their goods at.
restrictions result in larger economic losses in
Also, encouraging companies to purchase local
cases of floods and extreme weather. Take a look
components to qualify for green subsidies will
back at what would have been lost if we did not
lead to higher project costs. This, in turn,
have free trade before the trade war and you
contributes to an increase in producer price
would get a grasp on what is at stake. According
inflation and results in a decrease in the actual
to research from MIT, approximately 40% of the
amount of infrastructure that can be developed
reduction in solar power expenses can be ascribed
with the allocated funding. This approach
to economies of scale, and economists from the
would decrease the "carbon value for money,"-
World Trade Organization (WTO) have
that is, to maximize emissions reduction per
concluded that these scale advantages were dollar spent. Another crucial factor is time.
facilitated, in part, by global trade and Building new factories and supply chains will
interconnected supply chains. A research analysis surely take a lot of time, which the planet is
suggests that had restrictions on the trade of already running short of. Innovation is
solar photovoltaic modules been tighter in the important as well. As firms get protected by
past decade, prices in China would have tariffs and requirements of origin, along with
increased by 54% and in America by 107% by the subsidies to support them, they have little need
year 2020. Additionally, in a scenario with less to innovate lower costs and higher quality
globalized supply chains, projections indicate technologies. Smaller players are getting
that prices in 2030 could be 20-30% higher, protective as well. Interestingly, out of the
leading to reduced deployment of renewables due thirteen nations participating in the Electric
to the elevated costs. Then comes subsidies and Vehicle Initiative (EVI), only Norway and
“friendshoring,” which means reconstructing Japan impose no tariffs on EVs, despite the
supply chains in friendly countries. The USA initiative's intended goal of expediting the
Inflation Reduction Act (IRA), with subsidies of global introduction and acceptance of EVs.
$400bn-$1trn over the next decade to support Furthermore, India, among the EVI countries,
renewable energy, was introduced as a scheme to imposes the highest tariff, with a Most
Favored Nation (MFN) tariff reaching as high
lower US dependence on China. There are also
as 125 percent for EVs. And since 2020,
requirements of origin that encourage firms to
Indonesia has banned the export of nickel, of
buy domestic components to be eligible for green
which it produces 22% of global supply, to
subsides. For example, in order to access a
encourage battery manufacturing at home.
subsidy of $7500 for an EV, one half of the credit
Politicians are trying to face a global issue by
is available if the vehicle’s battery components
deglobalization measures! The current
are manufactured or assembled in America; the
approaches of the USA and China is a zero-
other half is based on the origin of the battery’s
sum approach in which no one wins. And
minerals.
climate change is a global issue that needs
global cooperation.
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