The Biden administration is deciding how much American-made equipment to require in renewable energy projects in order to qualify for tax credits — prompting disputes between energy developers and product manufacturers.
Fengqi You is a professor of energy systems engineering and an expert on the life cycle of solar panels and industry trends. You’s research shows that returning solar panel manufacturing to the U.S. by 2035 would reduce greenhouse gas emissions from panel creation by 30% compared to 2020. However, he says renewable energy tax credits designers need to consider differences in cross-border carbon emissions.
“The potential tax credits for American-made equipment utilized in renewable energy projects are likely to stimulate domestic manufacturing of renewable products, such as solar panels. However, global disparities exist in energy system structures, decarbonization status, industrial economies, supply-chain systems, and other socioeconomic and environmental factors.
“Consequently, reshoring the manufacturing of all products may not necessarily yield positive climate and environmental outcomes, despite the socioeconomic advantages. Research indicates that relocating solar panel manufacturing to the U.S. would enhance environmental and energy performance, aligning well with the nation's energy policies and climate action initiatives.
“When designing tax credits, it is important to consider the differences in cross-border carbon emissions, as they could influence the overall effectiveness of these incentives toward the climate goals.”