China has begun offering tax rebates to its photovoltaic panel manufacturers to boost domestic adoption of this clean energy source and support its domestic PV industry, hard hit by tumbling prices and  excess capacity. 

Manufacturers will be refunded 50% of the value added tax payable on solar panels until the end of 2015, according to the state-owned Xinhua news agency.

The move will no doubt infuriate western critics who have often accused China of  distorting the PV market through dumping.  Indeed, the EU launched an investigation last year that proposed a swingeing 47% duty on imported Chinese solar panels. The definitive decision is due in December.

But once the howls of anguish have died down, its worth noting that all countries try to support their “strategic” industries one way or another, often through subsidies or tax rebates either for manufacturers or customers.

For example, Spain is now in its third “cash-for-clunkers” scheme designed to prop up its car industry. The scheme which costs the taxpayers €70m, cuts the price of a new vehicle by €1000. The only requirement is to trade in an  vehicle that is ten years old or more.

Other countries have similar schemes and while  they are typically presented as helping the environment, by removing older, more polluting vehicles from the roads, the reality is that such measures are designed more to satisfy the powerful car manufacturers lobby by artificially stimulating new vehicle sales.

Studies have shown that the carbon footprint created during the manufacture of a new vehicle greatly exceeds the marginal reduction in lifetime tailpipe emissions achieved by substituting a new fossil fuel-powered vehicle for an old one. Needless to say, very few of the new cars bought through cash-for-clunker schemes are electric vehicles.

Even less difficult to justify on environmental grounds is Spain’s recent decision to oblige its power generators to produce 7.5% of electricity using Spanish coal until 2018. Again, political interests, namely the need to keep Spain’s coal miners in employment, outweigh environmental and economic considerations.

Much like Europe’s car industry or Spain’s coal sector, China’s solar industry is currently in a bad shape. Unlike the other examples, China’s solar manufacturers are much more deserving of artificial stimulus measures because  their industry is still finding its feet and, not least, because of China’s pressing need to reduce carbon emissions.

The country’s 10 biggest solar panel makers owe up 100bn yuan in debt and last year two of them, Suntech Power Holdings and LDK Solar,  defaulted on their debt repayments.

European countries subsidise cars and coal, China subsidises its solar industry. Who is greener than who?