Renewable Energy, Technology Transfer and International Trade

1
DIW BERLIN
International Trade with Solar Energy Technology
Components Evidence on the Structure and
Determinants?
34th IAEE International Conference Wednesday
June 22nd 2011 Session 63 Felix Groba German
Institute of Economic Research Berlin Department
of Energy, Transport and Environment Supported by
Heinrich Böll Foundation
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Motivation Research Hypotheses (1)
Figure 1. Development of Solar energy technology
component exports by country group 1996-2008 and
market structure 2008
Source own calculations, Data retrieved from UN
COMTRADE, WITS DATABASE

• Trade not respected in description and analysis
  global market development.
• Significant trade increase since 2001 (600
  since 1996).
• OECD (EU) countries dominant exporting and
  importing markets.
• Increasing importance of China and India.
• Dominant trade directions North-North and
  South-North.
• North-South and South-South trade remains
  limited.

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Motivation Research Hypotheses (2)
What determines trade with solar energy
technology components ? Is there evidence on the
Porter hypothesis? What role do regulation
and trade barriers in importing countries play in
determining solar energy technology exports?
H1 Stringent environmental regulation and
renewable energy policy frameworks explain high
exports of solar energy technologies.
H2 A regulatory environment supportive of
renewable energies increases imports of solar
energy technology goods.
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Table of Content
I. Literature on Environmental Regulation and
Trade
II. Empirical Model and Estimation Method
III. Data and Descriptive Statistics
IV. Estimation Results
V. Conclusion
Backup
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Literatur on Environmental Regulation and Trade
Porter Hypothesis Porter, van der Linde (1995) Regulation triggers technological innovations and increases competitiveness (strong version). Ambiguous empirical results Antweiler, Copeland 2001 Harris 2002 Jug, Mirza 2005.
Weak Porter Hypothesis Jaffe et. al (1995) Environmental regulation stimulates innovation (no focus on competitiveness impact). Positive empiricial results Popp 2006 Devries, Withagen 2005. Sectoral analysis.

• Research gap
• Detailed analysis of trade with renewable (solar)
  technology components.
• Analysis of policy environment in importing
  countries.

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Table of Content
I. Literature on Environmental Regulation and
Trade
II. Empirical Model and Estimation Method
III. Data and Descriptive Statistics
IV. Estimation Results
V. Conclusion
Backup
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Empirical Model and Estimation Method (1)
Xijt trade flow ß coefficients Yijt
economic mass j Dij distance
(1)
(2)
FEGLS

• Inconsistent under error heterogeneity.
• Inconsistent under persistent zero trade flows.

(3)
Poisson Pseudo Maximum Likelihood

• Provides consistent estimators (Santos Silva and
  Tenreyro 2006).
• Respects zero trade flow.
• Successfully implemented (e.g. McGee 2008,
  Siliverstovs 2009).
• fixed effects on exporter and importer countries
  (di, dj) to account for multilateral trade
  resistance.

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Empirical Specification

• Balanced panel of bilateral export flows from
  1999-2007.

Estimated Model

• Solar technology exports (21 OECD countries ? 129
  importing countries).
• General trade controls.
• Proxies of environmental regulation and renewable
  energy supportiveness.
• Importing country policy proxies.
• Fixed effect dummies and error component.

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Table of Content
I. Literature on Environmental Regulation and
Trade
II. Empirical Model and Estimation Method
III. Data and Descriptive Statistics
IV. Estimation Results
V. Conclusion
Backup
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Data and Descriptive Statistics
H1 Stringent environmental regulation and
renewable energy policy frameworks explain high
exports of solar energy technologies.
Figure 2 Share of solar electricity generation
from total electricity generation for selected
OECD countries 1996 - 2007

• Output oriented measures
• Broad Environmental Regulation Index
• Based on energy intensity and change in energy
  intensity.
• van Beers van den Bergh (1997)
• Solar electricity share ()
• Proxy of demand and policy stringency.
• Input oriented measures
• Per capita public RD budget solar energy ()
• Policy stringency variable (Johnstone 2010).
• Policy of renewable energy policies
• Incentive tariffs, quotas, tax measures,
  voluntary agreements, tradable certificates.
• Dummy for introduction.
• Duration of policy.

Figure 3 Public RD expenditure for solar energy
in US per capita for selected OECD countries
1996 -2007
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Sources IEA(2010), EIA (2011)
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Data and Descriptive Statistics
H2 A regulatory environment supportive of
renewable energies increases imports of solar
energy technology goods
Figure 9 Global non-hydro renewable net
electricity generation as share of total
electricity generation 1996 - 2008

• Output oriented measures
• Broad Environmental Regulation Index ()
• Non-hydro renewable electricity share ()
• Proxy of demand and policy supportiveness.
• Other Variables
• Effectivly applied tariffs on imports (-)
• Proxy of trade costs.

Figure 10 Development of OECD solar energy
exports and respective mean tariff applied by
importing countries.
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Sources UNCTAD TRAINS (2010), EIA (2011)
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Estimation Results
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Findings Conclusion

• Highly dynamic market dominated by few counties.
• Strict environmental regulation has not impact on
  export performance.
• BUT Countries with a strong renewable energy
  policies framwork export more solar energy
  technology components.
• AND countries that have introduced RE support
  policies early are exporting more.
• ? Evidence on the Porter Hypothesis!
• Policy framework and market size in importing
  countries decisive to determine export markets.
• Stong environmental regulation decreases imports
  (general measure).
• BUT Strong demand for renewable energies
  increases imports.
• ? Market size matters and Policy does matter!
• Trade cost do not matter (depending on fixed
  effects).
• Open Questions
• Respecting dynamics.
• Identifying the role of innovation.

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• Thank You!
• Questions?
• Comments Suggestions!

Contact Felix Groba DIW Berlin Mail Mail
Fgroba_at_diw.de Tel [phone]
..Backup
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Questions to deal with

• (1) Fixed effects problematic
• (2) Dependent Variable (what to estimate)
• (3) Zero inflation of dependent variable
• zero trade flows present especially in the early
  years of the analysis (27.8)
• How to implement in STATA (zip depvar
  indepvars if in, ...)
• FE? and panel structure or cross section?
• Necessary?
• (4) Including other Policy control variables
  (Graph next slide)
• Policies introduced to foster RE expansion on
  national level
• BUT may have and impact on trade performance
• Question do I need to control for it or is it
  included in other controls already?
• If yes
• Not the existence of the policy but the duration
  since implementation might isof interest

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Backup 1 - Data basis global market analysis

• Databasis
• UN COMTRADE Databank. 6-digit 1996 HS Codes
• Literature Review identifying PV, Solar Termal,
  Wind Technology Components
• Problems Dual use, data inflation
• BUT Best Proxy for cross time and cross country
  analysis

Source OECD/Eurostat 1999, Steenblik 2005a,
Steenblick 2005b, Steenblick 2006, UNCTAD
2005, IPCC 2007
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Global Market Analysis Country Specifics
X Exports M Imports i Product Group j
Country Index
(1)
(2)
  Country Share of Global Export Country Share of Global Export Country Share of Global Export Export Specialization (1) Export Specialization (1) Export Specialization (1) Comparative Advantage(1) Comparative Advantage(1) Comparative Advantage(1)
  1997 2003 2008 1997 2003 2008 1997 2003 2008
China 6.4 13.6 28.5 45 69 97 70 23 83
Germany 14.1 13.2 16.4 21 12 39 17 -9 -9
Japan 15.1 17.5 9.9 47 87 52 42 50 82
United States 15.2 9.2 6.3 5 -10 -34 -38 -13 -13
Italy 4.7 3.8 3.2 -12 -21 -25 14 13 -22
France 5.7 4.2 3.0 -10 -29 -39 0 12 5
Korea, Rep. 2.3 2.2 2.9 -29 -30 -11 -31 -90 -43
United Kingdom 6.4 4.5 2.8 3 -7 -21 -1 36 44
Sum 69.9 68.2 73.0
Sum OECD 83.6 73.2 61.0
RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition RXA gt 0 export specialization, market share of global technology export larger than average RCA gt 0 RCA RXA-RMA comparative Advantage, non-additive and without weighing for the size of product groups only for solar PV and solar thermal energy technology (1) Compared to Industrial goods WTO definition

• Results
• Germany is specialized in exporting but does not
  enjoy a comparative advantage because off high
  sector imports
• China and India are increasing their market
  shares and also gain on specialization and
  competitive advantage

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Empirical Model and Estimation Method (2)
Potential effects - Country specific time
invariant - country specific time
variant - Country pair specific time invariant
- country specific time variant
Country pair fixed effects explaining bilateral trade controlling for the resistance to trade of a specific country pair
Exporter and importer country fixed effects explaining exports of i independent of specific trade partners controlling for the resistance to trade of i and j separately De facto Random effects model Computing power problematic
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Data and Descriptive Statistics
H1b Countries that are more innovative on
renewable energies export more solar energy
technologies
Figure 5 Innovative activity in total patent
applications and renewable energy patent
application in OECD countries 1980 2007 (1996
100)

• Innovations are relevant for trade Krugman 1979
• Patents as indicator of innovation output
• Very dynamic innovative activity in renewable
  energies

Country share in total OECD patent applications
()
Figure 7 Country share in RE OECD patent
applications 1990 - 2007
Country share in total OECD renewable energy
patent applications ()

• Problem
• Data not solar energy technology specific

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Sources OECD(2010)
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Backup 2 - Introduction of renewable energy
policies
Figure 4 Introduction of Renewable Energy
Policies by country 1978 - 2010
Note ATAustria, AUAustralia, BEBelgium,
CACanada, CHSwitzerland, DEGermany,
DKDenmark, ESSpain, FIFinland, FRFrance,
UKUnited Kingdom, GRGreece, IEIreland,
ITItaly, JPJapan, KRRepublic of Korea,
NLNetherlands, NONorway, PTPortugal,
SESweden, USUnited States, Source IEA (2004),
authors extension