45 Pages Posted: 12 Dec 2009 Last revised: 5 Nov 2014
Date Written: December 10, 2009
This working paper maps out the structure and value chains of the wind industry, analyzes the wind industry's increasing global integration via cross-border trade and investment flows, and offers recommendations to policymakers for the design of investment and trade policies to help realize wind energy's potential. We find that demand for wind energy through longterm government support policies creates the basis for local supply of wind capital equipment and services and associated local job creation; policies that put a price on carbon will further help to make wind energy more competitive and increase the overall demand for turbines and equipment. Cross-border investment rather than trade is the dominant mode of the wind industry's global integration. Principal barriers to global integration are non-tariff trade barriers and formal and informal barriers that distort firms' investment decisions. These include local content requirements, divergent national industrial standards and licensing demands, and in particular political expectations. Intellectual property accounts for only a very small part of cost in the wind industry, and wind technology is widely available for licensing. Intellectual property rights are correspondingly not a major impediment for market participation. Credible long-term commitments coupled with a reduction or elimination of existing barriers to cross-border trade and investment are necessary to harness the full potential of global integration in reducing wind industry prices and increase worldwide deployment of wind energy.
Keywords: Wind Energy, Renewable Energy Subsidies, Energy Policy, Global Industry Integration, Foreign Direct
JEL Classification: H23, L22, Q42, Q48, Q56
Suggested Citation: Suggested Citation
Kirkegaard, Jacob F. and Weischer, Lutz and Hanemann, Thilo, It Should Be a Breeze: Harnessing the Potential of Open Trade and Investment Flows in the Wind Energy Industry (December 10, 2009). Peterson Institute for International Economics Working Paper No. 09-14. Available at SSRN: https://ssrn.com/abstract=1521651 or http://dx.doi.org/10.2139/ssrn.1521651