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Overcoming Barriers to International Investment in Clean Energy

image of Overcoming Barriers to International Investment in Clean Energy

The perceived potential of clean energy to support employment in the post-crisis recovery context has led several OECD and emerging economies to design green industrial policies aimed at protecting domestic manufacturers, notably through local-content requirements (LCRs). These typically require solar or wind developers to source a specific share of jobs, components or costs locally. Such requirements have been designed or implemented in the solar- and wind-energy sectors in at least 21 countries, including 16 OECD countries and emerging economies, mostly since 2009.

Empirical evidence gathered in this report shows however that LCRs have actually hindered international investment across the solar PV and wind-energy value chains, by increasing the cost of inputs for downstream activities. This report also takes stock of other measures that can restrict international investment in solar PV and wind energy, such as trade remedies and technical barriers. This report provides policy makers with evidence-based analysis to guide their decisions in designing clean-energy support policies.

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Local-content requirements in the solar- and wind-energy global value chains

This chapter describes the increasing use of local-content requirements in green industrial policies. It discusses the arguments for and against such policies and describes the key findings of recent evidence-based analysis regarding their possible impacts on international investment in different segments of the global value chains. The analyses include; (i) a review of recent WTO disputes associated with the use of LCRs in solar and wind energy; (ii) an overview of recent investorstate disputes; (iii) results from a 2014 OECD Investor Survey assessing how leading international investors in wind and solar projects perceive the impacts of policies that differentiate between foreign and domestic investors; (iv) results from a consultation with key private and public stakeholders in solar and wind energy hosted by the OECD in December 2013; (v) results from a new econometric analysis conducted by the OECD to estimate the quantitative impact of LCRs on international investment flows to the solar- and wind-energy sectors; (vi) findings from other quantitative analyses of the impact of LCRs on international trade; and (vii) empirical evidence compiled from the literature on the effects of LCRs in several individual countries. Finally, the chapter discusses the policy implications of these research findings.

English

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