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Global warming and the threat of cheap Chinese electric vehicles

Dean Baker

Suppose the G-7 finance ministers sat down and worked out a plan to spend tens of billions of dollars a year to subsidize developing countries in their transition to a green economy. Many of us might think this is a good idea since global warming poses a real threat to the planet.

Unfortunately, the G-7 finance ministers seem to have done the exact opposite. According to the coverage in the New York Times, they discussed ways to retaliate against China over its own plans to subsidize the transition to a green economy.

The article tells us:

“ Policymakers worry that a flood of heavily subsidized Chinese green energy technology products will cripple the clean energy sectors in the United States and Europe, leading to lost jobs and reliance on China for solar panels, batteries, electric vehicles and other products. ….

“ ’We need to stand together and send a unified message to China so they understand it’s not just one country that feels this way, but that they face a wall of opposition to the strategy that they’re pursuing,’ Ms. Yellen said at a news conference at the opening of the meetings. ”

It is worth distinguishing two separate issues here. The G-7 countries do have sophisticated manufacturing sectors that are producing EVs, batteries, and other items needed for a green transition. It is understandable that they would want to provide some protection to these sectors so that they don’t become completely dependent on China. Also, in the near term, tens of thousands of jobs are potentially at stake.

However, this does not change the thrust of what China is doing. According to an allegation made in the article, China is looking to massively subsidize its exports of green technology.

Those who are concerned about global warming might see this as a good thing, sort of like if the G-7 countries were prepared to cough up the dough to help save the planet.

Rather than treating China as an outlaw country it might make sense to take advantage of China’s subsidized exports and direct them to countries where they would not be competing with domestic industries. That would accurately describe much of the developing world.

Countries in Africa, Latin America, and South Asia could benefit from low-cost EVs as well as solar panels, batteries and other items needed for a transition to a green economy. This would not only have a large impact in reducing greenhouse gas emissions, it would also substantially reduce other pollutants in these countries, improving health and increasing life-expectancy.

This would be a great win-win story, but of course that would only be true if we cared about the future of the planet, something apparently not on the agenda at the G-7 meeting.

Source: Real World Econ Rev blog

Dr Dean Baker is a macroeconomist who co-founded the Center for Economic and Policy Research, Washington DC.

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