Over the past decade, there has been growing global concern about carbon emissions from energy-intensive commodity industries such as steel, cement, glass and aluminium. These industries are significant sources of carbon emissions, and various measures have been taken to reduce these emissions.

These industries are widely distributed around the world and are often located in regions where electricity costs are low, which means that the grid often has a large number of coal-fired generating units. Because these industries are widely distributed and there are many independent producers, the carbon emissions of these industries need to be addressed through extensive collaboration, which is often driven by industry or by other private sector organizations.

Solar manufacturing is also rapidly becoming a major source of carbon emissions and is beginning to receive attention as an energy-intensive commodity industry. More and more countries are starting to put a price on carbon as a means of reducing greenhouse gas emissions and ensuring that imported goods are treated the same as domestically produced goods by imposing a carbon tax on imported goods (sometimes referred to as a carbon border regulation mechanism, or CBAM).

This article will begin with a brief introduction to the carbon emissions associated with solar manufacturing. It then assesses emerging carbon pricing mechanisms for commodity imports and finally explores the possible impact of these mechanisms on the solar industry.

Solar manufacturing and carbon emissions

The production of metallurgical grade silicon for solar cells involves a series of energy-intensive steps. These steps include refining silica into ultra-pure polysilicon, manufacturing silicon ingots, and producing the basic silicon wafers used in solar cells.

For example, the Siemens method (the main technology used today) consumes between 70 and 140 KWH of electricity per kilogram of polysilicon produced.

Industry analyst Johannes Bernreuter estimates that the top six producers, five of which are Chinese, will be able to produce 470,000 tonnes of polysilicon a year by 2023. Across the industry, Thunder Said Energy estimates total polysilicon production capacity to be about 700,000 tons in 2020, rising to 1.6 million tons by 2023 (Figure 1).

These production estimates suggest that the annual energy consumption of polysilicon production in 2023 is 1122-224 billion KWH (or a staggering 112,000-224,000 GWH), the vast majority of which will be in China, which accounts for 90% of global capacity. While this may be a bit of an overestimate, as not all production capacity will be in use all the time, it shows the scale of energy use in the sector.

Because these energy-intensive parts of the solar industry are particularly concentrated in China, the carbon emissions associated with them are considerable. According to Statista, the carbon intensity of power generation in China in 2022 is 531.15 grams of CO2/kWh (gCO2/kWh). As a result, the production of polysilicon in 2023 is estimated to consume 112,000-224,000 GWH of energy, and this part of the supply chain is estimated to generate 60-120 million tonnes of CO2 emissions during the year.

Even considering China's recent efforts to reduce the carbon intensity of the grid, these carbon emissions associated with solar manufacturing are remarkable, especially given that they only reflect polysilicon production and do not capture carbon emissions from any other part of the solar supply chain.

In fact, the Clean Energy Buyers Association estimates that if the projected growth in solar manufacturing continues to occur primarily in China, and those production is not decarbonized, emissions from solar manufacturing could match those from global aluminum manufacturing by 2030, and exceed it by 2040.

Over the 2020-2040 period, additional emissions across the solar supply chain range from 14 billion to 18 billion tonnes of CO2.

Currently, a solar module made entirely from a Chinese supply chain has about twice the life-cycle carbon emissions of a solar module from a US or EU supply chain. The comparison is to some extent theoretical, given the relatively limited capacity of some parts of the solar supply chain outside China, particularly silicon wafers.

However, this is rapidly changing, albeit from a low base, as wafer production is expanding in Southeast Asia and there are multiple producers planning to start wafer production in the United States at tens of gigawatts. We are also seeing an expansion of silicon wafer production in Turkey.

The excess inventory of solar modules that had accumulated in EU warehouses was resolved by clearing them at distressed prices, which made almost all solar manufacturing companies in the EU almost unprofitable for some time and put these efforts on hold.

When the inventory glut is resolved, the market will stabilize and these EU wafer investment projects are likely to continue. There are also moves to expand polysilicon production that are not limited to China.trina solar panels