Impact of Subsidies in Wind Energy on International Trade

The study analyzes the impact of subsidies in wind energy on international trade and the significance of these subsidies in the wind energy industry. It discusses the positive and negative impacts of subsidies and their effects on the economies of developed and developing nations.

Running head: INTERNATIONAL TRADE
INTERNATIONAL TRADE
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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Wind energy industry......................................................................................................................4
Significance of subsidy in wind energy...........................................................................................9
Positive impacts of subsidy in wind energy industry....................................................................10
Subsidies in Wind energy industry................................................................................................15
Conclusion and Recommendation.................................................................................................16
Reference list.................................................................................................................................17

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Executive Summary
The study is about the improvement in the wind energy and the policies that the
developed economies are implementing in order to implement the policies that will increase the
improvement in the windmill. The development of the windmill and wind energy is going to
increase the resource distribution. It has been seen that most of the developed nations has
initiated some form of renewable energy. Countries like India and Australia are increasing their
investment on the renewable energies and they are improving their energy efficient resources
that will definitely allow the economies to improve their production.
The study is mainly aiming to identify the importance of the subsidies that are given in
wind energy. Most of the developed nations are highlighting the importance in the investment in
the wind energy. The developed economy is going to increase the importance of the investment
in the wind and other renewable resources. During the time of 2018-2019, the Australian
economy is going to invest heavily in wind energy as they are going to install more than 10
gigawats in wind and solar energy, and if they can maintain the rate of investment in the solar
energy then Australia will reach about 53% of total renewable energy. It is important from the
perspective of countries like Australia, China because of the fact that non-renewable resources
are decreasing and it is important to find the alternative source of energy. Now renewable
energies in the form of wind and solar energy are helping in the development and channelization
of resources that will definitely allow these economies to increase the development of
investment. Positive aspects of subsidizing wind energy are that through the improvement in the
investment in the economy the cost of manufacturing will decrease. On the other hand, the
negative aspects are that installation of this kind of project is costly and it will require incentives
of both private and government.

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Introduction
Introduction of international trade is definitely going to increase the resource utilization
and channelization of the resources in an effective way. The study will be going to analyze the
impact of international trade on provision of subsidies in wind energy. This is important in the
sense that in the modern world of business, most of companies are considering the fact of
comparative advantage and terms of trade. The study will be looking to identify the pros and
cons of subsidies in wind energy by identifying the comparative advantages that each company
in wind energy manufacturing units is having. The main aim of this study is to highlight the
international business and most developed nations is actually considering the renewable energies
that are widely in demand as they are a big part of international trade. The main agenda of this
study is to incorporate the effect of GDP on the wind energy industry. This is significant in the
sense that it will analyze the terms of trade for the countries like Australia, China and India.
Moreover, the study will also consider the terms of trade for these countries regarding the
policies that is taken by the government regarding the subsidies in the industries.
This is important in the sense that through the incorporation of better development of the
renewable energy in the economy further investment can come up from foreign countries in the
sector of wind energy. It has been seen that through the innovation in investment in the
renewable energy, industry will actually increase the social benefit for the consumption of wind
energy. This is important in the sense that through the improvisation of better investment, the
companies doing business in the wind energy industry will be able to supply the economy by
indulging in the development of energy industry. Most of the government in the developed
nations likes Australia, China and India are looking to increase the development of investment.
The implementation of government policy will be crucial in the sense that it will definitely allow

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the indulgence in the incorporation of better policies so that they can increase the supply of wind
energy
Discussion
Wind energy industry
Taking the effect of the subsidies in wind energy, economies in the form of better
improvement in the economy that will allow the economy to incorporate the effective business
policies. Impact of the global occurrence is going to indulge the development of the resource in
the economy especially the wind energy. The re-emergence of China and India into the global
economy is the most important economic event in the sense that due to improvement in the
situation the demand of skills and potentiality in the Australian market is increasing and will
continue for next 15 years. The Rapid growth of the population in India and China will increase
the demand for mineral and energy commodities that Australia is having huge supply (Baker and
Sovacool, 2017). The immediate effect of rapid growth of population in India and China on the
Australian economy is the improvement in the terms of trade.
Figure 1: Australian terms of trade

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(Source: Treasury.gov.au, 2012)
The above figure is showing the level of the terms of trade that is happening within the
Australian economy is facing from 1969-70 until 2019-2020. The rapid increase in the terms of
trade through the development of rapid growth in the population in China and India is pushing
the Australian real exchange rate to high margin (Bento and Fontes, 2015).
Figure 2: GDP growth of big economies
(Source: Treasury.gov.au, 2012)
The above diagram is showing the growth of the GDP in the countries like Australia,
Japan, South Korea, Malaysia, China and India have been shown during the period of 1964-
2009. During this period, Japan got the highest level of the GDP growth. Through the
incorporation of the Wind energy countries like Japan, Australia has been getting high benefits
from the growth of the economy. Both South Korea and Japan are growing by huge margin by

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incorporating changes in the economy through improvement in their services and manufacturing
sectors. Moreover, Australian economy is having huge supply of minerals and the growth of the
rapid industrialization is going to increase the demand of other economy regarding the
consumption of these minerals. Australian economy is having surplus of energy and the presence
of the high terrain and open land is fuelling the urge of the wind energy (Chalvatzis and
Ioannidis, 2017). The graph below is showing Australia is having continuous and stagnant
growth regarding installed wind capacity from 1997 till 2016.
It is highly important for the developed and developing nations to focus mainly on the
improvement in wind energy. Investment in the Australian economy is going stable more or less
and on the other hand, through the incorporation of wind, energy is going to increase the supply
of renewable resources will increase and use of fossil fuels will decrease.
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
0
40
80
120
160
200
Installed Wind capacity (gigawatts)
India
China
Australia
Volume of wind energy
Figure 3: Installed wind capacity in India, china and Australia
(Source: Ritchie and Roser, 2017)
In the above diagram, the installed wind energy is being analyzed. Through the
development of better indulgement of the foreign, direct investment is basically increasing the
investment in the wind energy and India and China are having high investment in the installed
wind capacity. Until 2006, the investment in the wind energy was showing a constant move but

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after that, India and China started to increase their investment in the wind energy (Curran et al.
2017).
Positive case of Wind energies due to the development and growth of the economy is
demanding more of renewable resources like wind energy. Through the increase in the growth of
the economy, the countries will be able to improve their revenue structures that will be crucial in
monitoring the development of the GDP and in order to indulge the improvement in the
innovation. Through the improvisation of resource distribution in wind energy in the
international market, the developed and developing economies will be able to identify the
improvement in the technology that will increase the production ability of the employees.
In spite of having so many positive impacts of the subsidies in wind energy, the
economies also face certain negative impacts due to the subsidies in wind energy. One of the
negative impacts is that Wind energy mainly ends up in finishing limited number of resources.
However, the involvement of the business plans to increase the wind energy it is required to
establish the equipments and in doing so will definitely use up in utilizing the resources. The
biggest negative factor of these wind energies is non-transferable property of these energies.
They energy cannot be transferred, imported or exported to other countries through trading. On
the other hand, these energies have to be consumed at the place of generation (Exizidis et al.
2016).

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Figure 4: China’s Energy Consumption
(Source: Economy, 2019)
Another important negative impact is that Wind energy shift the consumption of oil from
the developed nations to the developing nation. Huge demand for the coal industry is actually
tempting the government to increase the subsidy in the wind energy so that more wind turbines
can be made within the economy to support the growing internal demand of the country
regarding the consumption of energy.

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Significance of subsidy in wind energy
In the modern trade and commerce, one of the most highlighted issues that have popped
up in Australia is the huge rate of reduction in the subsidy mostly in solar and wind energy. The
Tirades that are associated with many wind and solar energy has completely forgone the amount
of subsidy. Most of the wind energy projects do have a long contract of about 12-15 years and
they are known as power purchase agreements. According to most of economists the valuation
and price of the projects becomes zero once the plant is completed. Some of notable wind energy
projects are putting zero value to their LDC’s and they are 530MW Stockyard Hill wind farm,
the 200MW Silverton wind farm, and the 470MW Cooper’s Gap wind farm (Parkinson and
Parkinson, 2018). Most of the economists argue that all the renewable resources can be
developed and operated at $55-70/MWh and they do not need any kind of government subsidies.
On the other hand, the price is so high because of the fact that supply is lacking behind the
demand of the economy regarding the energy consumption in the global level (Parkinson and
Parkinson, 2018).
Provision of subsidies in the wind energy is taking away the wind and solar energy from
the best possible sites. Since the government is providing the subsidy, thus it is required for the
project sites to launch their projects in the chosen sites. The subsidy costs of about $2.3 billion
are not helping the development of the project to deliver in correct place and they are not giving
their hundred percent production rate (Theaustralian.com.au, 2019). In some regions, the
transmission network is not helping growth of the project and in sometimes the generators are
having huge constraint.

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Positive impacts of subsidy in wind energy industry
The recent report that has been published by Asian Development Bank (ADB) compares
the potential outcomes for the Asian big guns regarding the comparative advantages and how
they are helping in improving the volumes of international trade. Through the incorporation of
the data, it has been seen that the subsidies in wind energy of the Asian countries is likely to
reach the height of $148 trillion, they will account for 51% of the global output as well as half of
global trade, and the Asian top countries will do development in 2050 (Gavard et al. 2016). Most
of the developed nations need to maintain the growth of their economy so that they can maintain
the standard of living of the people living. It is important for the most developed economies to
maintain the comparative advantages. The structure of the Indian economy has undergone certain
changes. The service industry is contributing to about 50% in the total subsidies in wind energy
(Heidari and Pearce, 2016). On the other hand, the developed economies are mainly focusing on
the development of manufacturing sector. The main components of Indian Export are comprised
mainly of raw materials and labor-intensive technologies in the form of mineral fuels and
precious stones. On the other hand, even in Australia services are dominating about 70% to the
country subsidies in wind energy with mining dominating the growth. Since the outer structure
of the market in the Asian countries is, improving and they are going to develop the investment
in the wind energy more in the upcoming years.
The bilateral growth in trade between Australia and India has increased by huge margin
in the last few years. During the period of 2003-04 to 2008-09, the bilateral trade has increased
by 24% and the number is reaching to about US$16 billion and trade in goods costing to about
US$13 billion. The import from Australia is 15 times more than the export to Australia. In order
to make discussion regarding the comparative advantage the development of the formula is going

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to be discussed first (Jebli and Youssef, 2017). The main aim of Revealed Comparative
advantage will identify whether a country has relative export advantage or disadvantage with
respect to the rest of the world in a particular goods and services. Using the high growth in the
bilateral trade the economies in the form of China and India will look to bring in high amount of
investment from foreign countries in their renewable resources. However, these kinds of energy
cannot be transferred but the indulgence of investment in these energies will increase.
RCA for subsidised wind energy country under Non-subsidised wind energy commodity
category RCAij is given by:
Xij is Country is exports in category j in energy
Xwj is World exports in category j in energy
Xi is Country is total exports in energy
Xw is Total exports of the world
However, the destination specific Revealed Comparative
advantage (DS-RCA) is given by
Xijk is Country is exports in category j to country k
Xwjk is World exports in category j to country k
Xik is Country is total exports to country k
Xwk is Total exports of the world to country k

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The positive aspects of the subsidizing the wind energy can be claimed in the form of better
supply of energy to the global market and through the investment in the wind energy, the
renewable energy market is developing.
It is true in the sense that through the development of less population, it will be highly
beneficial for any country to increase the benefit of trading. Through the incorporation of a
smaller number of populations, it will be significant for every country to increase the standard of
living. The term standard of living is closely related with the purchasing power of the economy.
In order to identify the purchasing power parity, the SUBSIDIES IN WIND ENERGY per capita
is measured. Now the SUBSIDIES IN WIND ENERGY per capita is measured by SUBSIDIES
IN WIND ENERGYpp = Total SUBSIDIES IN WIND ENERGY/population. Through this
measurement, it is possible to determine the per capita SUBSIDIES IN WIND ENERGY most of
the developed nations try to indulge the standard of living of their population so that the
economy will be booming and will be able to involve the policies.
Brazil
Canada
China
Egypt
Germany
India
Japan
Mexico
South Korea
United
Kingdom
United
States
0 10000 20000 30000 40000 50000 60000 70000 80000
GDP (in billion US dollar) Population (in millions) Per Capita GDP (in US Dollar)

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Figure 5: Standard of living
(Source: Created by Author)
From the above diagram, it can be seen that United States is having high standard of
living that is followed by Canada. On the other hand, through the improvisation of the overall
economy it is important to indulge the development of the resources. Moreover, considering the
fact that these countries are having high standard of living but it will not signify the fact that it
will be highly sustainable for the development of the wind energy. It is highly important in the
sense that development of the wind energy should cater the demand of internal economy and
responding to the situation is going to improve the development of the economy (Silvast, 2017).
Moreover, through the incorporation of better service in the installation of wind energy is going
to help a lot to the economy. Through the involvement of better introduction of the wind energy,
the demand and supply of energy will maintain strong correlation. This will obviously allow the
economy to increase the resources. The above diagram is showing the fact that united States,
Japan and Canada are increasing their investment opportunity and purchasing power regarding
the wind energy. Now it will be obvious for the country having less population pressure to enjoy
the positive impacts of the wind energy.
The terms of trade among India and Australia and Australia and China are increasing
gradually. It is important to identify the main components of import and export that is one of the
key components regarding the development of the trade and commerce. Through the
incorporation of better development of the resource utilisation factors that will automatically
indulge the development of the terms of trade. Mostly the energy in Australia are having surplus
in the mining and minerals that will automatically indulge the improvement in the economy.
Through the development of the economy, the information spread is essential in the sense that it

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will determine the improvement in the economy. Through the incorporation of SUBSIDIES IN
WIND ENERGY and terms of Trade or TOT is going to increase the resource distribution that
will easily bring up the innovations and the export import of the company. It is extremely
important for the whole economy to bring in innovations in the technologies that will bring in
innovations in the form of better development of the resource utilisation. This will automatically
highlight the importance of consumer behaviour so that the incorporation of better development
is going to bring changes in the economy that will automatically bring in enough improvement in
the standard of living.
Challenges or negative aspects of subsidies in wind energy
However, in order to operate the wind energy, the external use of electricity will be
required as the wind turbines are located outside the city and in order to generate the turbines
electricity is any form is required which increases costs of production. Thus government subsidy
is required. Another problem is that when the climate is dry then lack of enough wind will not
generate that much of energy. The wind energy is one of the cost effective method of energy
production. One of the efficient land based project is going to increase the resource distribution
and channelization of resources. In 2016, the wind sector employed more than 100,000
employees and wind turbine technician is one of the fastest growing jobs in America. According
to the Wind Vision Report, the industry is having potentiality to support more than 600,000 jobs
in sectors like installation, maintenance and supporting services. In the US economy, the wind
energy is having the capacity to impact and growth will be increased by $20 billion. Moreover,
the wind energy gives an opportunity to use locally available resources.

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Subsidies in Wind energy industry
Support and subsidies for wind energy fell by almost 80% between 2013 and 2016. The
amount of subsidy came down to about $1.27 billion. The main reason behind this fall in share in
subsidy is the fall in the direct expenditure (ETEnergyworld.com, 2018). This is because of the
fact that due to lack of government support the foreign direct investment in these sectors are
falling by huge margin. Overall subsidy in the renewable industry is falling from $15.26 billion
to $6.68 billion. Subsidies in the Indian economy mounted to Rs 151,480 crore ($23 billion) in
financial year 2016-17, a 36 per cent decrease since financial year 2013-14. According to a
report by the International Institute of Sustainable Development (IISD) and the Council on
Energy, Environment and Water (CEEW), India’s fossil-fuel subsidies fell sharply by nearly 70
per cent, from Rs 1,73,330 crore ($29 billion) in financial year 2013-14 to Rs 52,980 crore ($8
billion) in financial year 2016-17 (Windpowermonthly.com, 2019)
Conclusion and Recommendation
The whole study is going to highlight the fact that through the incorporation of better
development of the business, countries like India, Australia and China are developing their
international trade. Through the incorporation of better development of Non-subsidized wind
energy & subsidized wind energy will determine the improvement in the economic factors that
will automatically increase the resource distribution among the economies. Through the
incorporation of better development in the terms of trade will allow the incorporation of better
growth in the economy. On the other hand, using the resources will allow the economy to bring
in more resources. Through the development of the trade and commerce, the developing and
developed nations will improve their subsidized wind energy supply. Through the involvement
of the better trade and commerce will definitely allow the incorporation of better resource

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utilization that will definitely allow the improvement in the FDI regarding the investment in the
wind energy.
Through the development of better understanding of the economy will allow the
government to increase the information that will definitely increase the future demand of the
installation of wind energy. On the other hand, through the utilization of resource establishment
and resource distribution will allow the incorporation of resources but also it will increase the
terms of trade so that they can identify the SUBSIDIES IN WIND ENERGY and will allow the
indulgence in the investment that are done by the foreign countries. It is important for the
government to increase the resource distribution and will be looking forward to indulge the
development of better terms of trade and will be gaining from terms of trade. This is important in
the sense that through the utilization of installing wind energy, the economy will be drooling into
new areas of investment.

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