Billions in U.S. tax dollars could otherwise fuel China’s mission to dominate the future clean energy economy.
A bipartisan bill introduced on Wednesday would block Chinese-controlled companies from accessing Inflation Reduction Act (IRA) taxpayer-funded incentives. Sen. Sherrod Brown (D-Ohio) is leading “American Tax Dollars for American Solar Manufacturing Act” with a bipartisan cohort, which includes Sens. Bill Cassidy (R-La.), Jon Ossoff (D-Ga.) and Rick Scott (R-Fla.), to prevent China along with other “foreign entities of concern” from receiving the IRA’s 45X Advanced Manufacturing Tax Credit. This restriction would be accomplished through an amendment of the Internal Revenue Code of 1986.
As readers of our blog know, the IRA was designed to serve two goals: Both to spur the growth of America’s factories and build a more resilient supply chain that freed the United States from dependency on Chinese manufacturers for some of the most critical goods in the future marketplace. Certainly, we’ve seen a factory boom fruited from IRA benefits already.
So far, private companies have invested $177 billion in the United States EV and battery supply chain and $81 billion in the U.S. clean energy manufacturing and infrastructure sector, according to the White House. However, that progress stands at risk if Chinese companies are allowed to seize American taxpayer dollars intended to grow China’s manufacturing footprint in the U.S.
“For years, China dominated the clean energy supply chains. We let the American jobs and factories go overseas,” President Joe Biden said in a speech marking the one-year anniversary of the Inflation Reduction Act in August 2023. “For how long have we gone through this period where the answer for the previous — mostly in Republican, but some Democratic administrations — the answer had been: Find the cheapest labor in the world; go — close the factory here, build it over there, wherever that is; and then import the product from abroad? Not anymore. We are building it here and sending the product over there.”
Though solar panels were first invented at New Jersey’s historic Bell Labs more than 70 years ago, China has established its dominance of the world’s solar panel supply chain through enormous state subsidies that fueled waves of overcapacity that burgeoning U.S. solar panel factories could not withstand. The IRA has ignited a resurgence of this critical industry in America, but that progress is at stake as cheap solar imports are flooding the U.S. market once again. Ensuring that the IRA’s powerful tax credits support the American manufacturers it was intended for is essential to fulfilling the law’s intent.
It’s worth noting that with billions of dollars flowing from the IRA to America’s nascent clean energy industry, solar is just one of the many sectors with tantalizing tax credits that China has set its eyes on.
In a new South China Morning Post article, Alliance for American Manufacturing President Scott Paul urges the federal government to not allow IRA tax credits to seed Chinese electric vehicle companies in the United States while America’s domestic auto supply chain is tackling the delicate transition to EV production.
“Scott Paul, the head of the Alliance for American Manufacturing trade group, called it a ‘foolish’ idea. ‘At a time when many new and established brands are just scaling up EV production, [a] Beijing-backed Chinese auto juggernaut could wipe them out,’” the article quotes Paul.
China will leverage every opportunity to cement its chokehold on the clean energy supply chain. We cannot cannot allow our own tax dollars to aid Beijing in this. If we do, we surrender our ability to supply our own clean energy products and innovate the energy solutions of the future.