The Shipment
October 24, 2024
The Entity List and Clean Energy Missteps
Entries to the Entity List
What’s Happening: The U.S. Commerce Department’s Bureau of Industry and Security (BIS) has recently added 26 entities to its “Entity List,” flagging them for acting against U.S. national security. While the identities of which companies, organizations, and individuals have been added are unknown, the intention is likely to crack down on the evasion of U.S. sanctions on Russia and Iran for the purchase of military hardware. Most of the listed entities are from Pakistan while the rest originate from China, the United Arab Emirates (UAE), and Egypt. Concurrently, a major BRICS (Brazil, Russia, India, China, and South Africa) summit is occurring in Russia this week and, of note, those 26 additions to the Entity List all hail from countries that are either BRICS members or are interested in applying.
Why It Matters: Many of the entities added to the list were reportedly involved in procuring military-related equipment that could either directly or indirectly assist military programs in Russia, China, or Iran. Added entities from the UAE and Egypt were allegedly attempting to evade U.S. sanctions put in place after Russia’s 2022 invasion of Ukraine. It is unclear from the BIS’ press release, however, whether these entities were attempting to provide those parts to countries of concern, making these Entity List additions a potentially controversial move given the United States is on friendlier terms with both the UAE and Egypt. That the U.S. government has made these additions to the Entity List concurrently with the BRICS summit – for which a key goal is to outline systems to circumvent Western financial institutions – is likely to fuel the desire for alternative systems among these countries.
Looking Ahead: This move by the Commerce Department will be followed up with by further sanctions on Russia next week, as Treasury Secretary Janet Yellen stated Tuesday. The specifics have yet to be laid out, but they will likely include additional restrictions on third parties suspected of supplying Russia’s war effort as well as details on how to use Russia’s frozen assets to fund Ukraine.
Solar Snafu
What’s Happening: The U.S. Department of the Treasury announced that solar manufacturing projects will be eligible for a tax credit worth up to 25 percent to further promote the domestic solar industry. This tax credit, which was included in the CHIPS and Science Act, will apply to advanced manufacturing facilities and equipment that produce the polysilicon used in solar modules. The credits will also be available retroactively to companies that have made investments before Tuesday’s announcement, benefiting at least one factory already under construction in Georgia.
Why It Matters: These new tax credits are yet another Biden Administration incentive to bolster domestic industries producing in-demand technologies, such as semiconductors and renewable energy systems. Yet Biden’s broader climate goals are likely to conflict with his administration’s trade policies, in particular its introduction of 50-percent tariffs on Chinese solar cells in late September. While the United States only imported about $11 million in affected solar products from China in 2023 – partially the result of previous, high tariffs on Chinese solar products – solar manufacturers continue to push for more protectionist barriers. On the other hand, the United States imported more than $19 billion worth of the same solar cell products from other countries, illustrating that current tariffs on China are protecting against only a small fraction of imports. Further protections would likely impact U.S. allies with a far greater import value and would of course undermine the Biden Administration’s goal of reducing emissions by reducing access to foreign solar products.
Looking Ahead: Current U.S. solar policies – a mix of generous subsidies for a small number of domestic producers and high tariffs on low-cost foreign goods – is a recipe for slowing the transition to clean technologies as it increases costs for U.S. consumers. The United States must decide which is more important: allowing green-energy technologies an open market to grow and provide U.S. consumers with low-cost options or raising tariffs on these technologies from abroad to protect domestic solar producers.