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POID Public Events

Harvard Business School

Entrepreneurial Management Unit

Ray of Hope? Chinese innovation, green industrial policy and the rise of solar energy

John Van Reenen (LSE), joint work with Ignacio Banares-Sanchez, Robin Burgess, David Laszlo, Pol Simpson and Yifan Wang

Wednesday 03 April 2024 14:30 - 15:30

Off Campus

About this event

The rapid decline in global cost of solar panels from the early 2000s coincided with China’s growing dominance in solar photovoltaics (PV) and its adoption of green industrial policies. We evaluate the effectiveness of local, city-level policies to encourage growth and innovation in the Chinese solar industry. Using new data on solar subsidy policies, patenting, production and trade and a synthetic-difference-in-differences approach, we show that production subsidies caused large increases in solar PV output, innovation and the productivity. Cities combining production subsidies with R&D support had an even larger impact. We can reject negative spillovers to other cities, suggesting business stealing effects are outweighed by knowledge spillovers. Although demand subsidies targeted at solar generation reduced pollution, they had little impact on local solar output and innovation, as additional demand was largely obtained from other Chinese cities. We interpret these results through the lens of a quantified general equilibrium model with heterogeneous manufacturers, intra-national and international trade costs and endogenous choices of R&D, entry/exit and trade. Our results suggest substantial benefits to China from its solar policy, even abstracting from the climate change externality. We draw implications for green industrial policies in other countries, suggesting such interventions can foster growth in clean energy.

Participants are expected to adhere to the Events Code of Conduct.

This event will take place Off Campus.