Congress Should Pass Legislation Prohibiting Chinese Companies from Receiving Inflation Reduction Act Tax Credits
WASHINGTON — The Coalition for a Prosperous America (CPA) today released a statement after Ford announced it would pause its deal with Chinese Communist Party (CCP) battery maker CATL. Ford’s partnership with the CCP-aligned battery maker has come under intense scrutiny from Congress given the possibility that CATL could collect Inflation Reduction Act (IRA) tax credits funded by American taxpayers. In April, a CPA economic analysis determined that Chinese manufacturers could earn up to $125 billion in tax credits under the IRA.
In March, U.S. Senator Marco Rubio (R-FL) introduced legislation to significantly restrict the eligibility of IRA tax credits and prevent Chinese companies from benefiting. This followed a letter Rubio sent to the Departments of Treasury, Energy, and Transportation seeking assurances that no taxpayer subsidies would go to Chinese recipients — including, notably, to Ford’s deal with CATL. In July, Chairman Mike Gallagher (R-WI) of the Select Committee on the Chinese Communist Party and Chairman Jason Smith of the Committee on Ways and Means launched an investigation into Ford’s partnership with CATL.
“Ford should not just pause its deal with CATL — the CCP’s EV battery company — it should cancel it for good,” said Zach Mottl, Chairman of CPA. “Chinese companies should have no business qualifying for Inflation Reduction Act tax credits, and it was a serious mistake to pass the Inflation Reduction Act without those guardrails in place. The CCP already heavily subsidizes its renewable energy industry, and companies like CATL have deep ties to China’s continued use of forced labor. It’s time for Congress and the Biden administration to take action and prevent Chinese companies from exploiting more than $100 billion from American taxpayers as a result of the Inflation Reduction Act.”
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. CPA strongly believes that Congress should pass additional legislation to prohibit Chinese companies from being eligible for IRA tax credits.
Earlier this year, CPA’s Economics Team released a report analyzing China’s actions after the passage of the American Recovery and Reinvestment Act (ARRA) that forced the closure of numerous U.S. solar manufacturing facilities between 2011–2014. Despite ARRA’s 30% tax credit for investment in clean energy manufacturing facilities, China’s plan to undermine it worked.
CPA’s Economics Team released a report yesterday 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.
Read more of CPA’s analysis here.