WASHINGTON — The Coalition for a Prosperous America (CPA) today applauded U.S. Senator Marco Rubio (R-FL) and U.S. Representative Carol Miller (WV) for introducing the Protecting Advanced American Manufacturing Act, bicameral legislation that would prohibit firms in China, and other U.S. foreign adversaries, from receiving taxpayer credits in the Inflation Reduction Act (IRA). Specifically, the bill would prohibit any company from receiving Section 45X tax credits in the IRA that is owned, controlled by, operated by, under the substantial influence of, or organized under the laws of a foreign adversary.
The introduction of the Protecting Advanced American Manufacturing Act comes ahead of the Biden administration’s release of guidance for the Section 45X production tax credit in the IRA.
CPA has long-called for excluding China from benefiting from IRA tax credits.
“We applaud Senator Rubio and Congresswoman Miller for introducing this important legislation to ensure that Chinese companies, which are already subsidized by the Chinese government, are not benefiting from billions of dollars in Inflation Reduction Act tax credits,” said Michael Stumo, CEO of CPA. “The Inflation Reduction Act is an important industrial policy aimed at reducing U.S. dependence on China while building out renewable energy manufacturing at home. It has already led to billions of dollars of investment in domestic U.S. solar production But the Inflation Reduction Act still has a serious loophole that allows China to reap its benefits. Congress must act to prohibit Chinese companies from receiving Inflation Reduction Act tax credits.”
In April, a CPA economic analysis determined that Chinese manufacturers could earn up to $125 billion in tax credits under the IRA. Since the IRA was signed into law, a number of Chinese companies have announced U.S. investment plans to take advantage of IRA tax credits, including JA Solar in Arizona, LONGi in Ohio, Canadian Solar in Texas, and Gotion in Illinois.
As CPA Chief Economist Jeff Ferry wrote in October, “If Congress and the Biden administration want the IRA to be successful—and reduce China’s dominance in the solar industry—lawmakers must pass additional legislation to ban China from receiving IRA tax credits. Failing to do so threatens the IRA’s success and the carefully laid plans of multiple American solar manufacturers hoping to increase domestic manufacturing in the United States.”
In September, CPA’s Economics Team published a report that further highlighted why Congress and the Biden administration must act to prevent China from undermining the stated goals of the IRA. The report, which analyzes market data, shows concerningly how a tidal wave of solar panel imports is threatening the IRA’s goal of rebuilding the U.S. solar supply chain. According to analysts Wood Mackenzie, this year’s deployments of solar equipment should rise around 50% from last year’s 20 gigawatts (GW) to around 31 GW this year.
The problem is that manufacturing capacity and imports are rising much faster than that. U.S. Customs data shows that solar module imports in the first seven months this year were up 179% over the same period last year. The monthly figures are even worse. In January 2022 the U.S. imported $422 million worth of solar modules. A year and a half later, in July 2023, imports came in at $1.7 billion, four times greater.
Most of those imports are coming in from Vietnam, Cambodia, and Malaysia—countries that the U.S. Department of Commerce recently determined are being used by China to illegally circumvent AD/CVD duties. But the raw materials and the solar cells used in those panels come from China. China is driving the growth of the global industry. According to industry analysts Clean Energy Associates, China’s production capacity is expected to double this year to reach 866 GW by the end of this year, and increase further next year to over 1,000 GW or 1 terawatt (that’s one trillion watts of electric power). That’s more than double China’s capacity from just one year ago when the IRA was passed.
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