Solar Panel Reshoring in Europe Delivers Modest Climate Gains, Study Finds

The European Union’s flagship plan to bring solar panel manufacturing back home will do far less for the climate than many policymakers might hope, according to a new study that dissects the global photovoltaic supply chain with unprecedented detail. The research, published in the Journal of Industrial Ecology, models what happens if the EU meets the target set by its Net Zero Industry Act: supplying at least 40 percent of its solar module demand through domestic manufacturing by 2030. The verdict is sobering. Reshoring module assembly to Europe cuts the carbon footprint of EU solar electricity by only about 5 percent, adds roughly €4 billion to European GDP — less than 0.04 percent — and creates around 65,000 jobs, while most of the emissions and value embedded in the supply chain remain firmly anchored in Asia.

The study’s authors, led by Lorenzo Rinaldi of the Department of Energy at Politecnico di Milano, built what they call a hybrid life-cycle assessment framework, embedding a detailed process-based model of the crystalline-silicon photovoltaic supply chain into the multi-regional input–output structure of the EXIOBASE database. The distinction matters because the two dominant tools for assessing the environmental footprint of technologies each fail in opposite ways. Process-based life-cycle assessment captures the fine technical detail of manufacturing but truncates the wider economy-wide ripples of production decisions. Top-down input–output models, by contrast, capture the whole economy but are too aggregated to distinguish polysilicon refining from wafer slicing or cell fabrication. The hybrid approach stitches the two together, resolving 18 new photovoltaic activities and 16 new commodities within a model spanning 22 regions, 205 activities and 220 commodities.

The supply chain the researchers resolved is one of the most geographically concentrated in the world. China accounts for more than 80 percent of global cell and module manufacturing capacity and more than 95 percent of the capacity for polysilicon, ingots and wafers, the electricity-hungry upstream stages where raw silicon is purified and sliced into the building blocks of solar cells. The model represents the full chain for monocrystalline silicon technology, which made up more than 98 percent of global production in 2024, from metallurgical-grade silicon through solar-grade silicon, ingots, wafers, cells and modules, along with balance-of-system components, installation and end-of-life treatment. Each stage is parameterised with bottom-up life-cycle inventory data drawn primarily from the IEA PVPS Task 12 database, complemented by NREL inventories and IRENA cost data, and harmonised to a functional unit of one square metre of module with a representative efficiency of 19.5 percent.

Before applying the model to policy, the team verified it against the literature. The carbon footprints of solar electricity produced by the hybrid model fall between 22 and 65 grams of CO2-equivalent per kilowatt-hour across regions, squarely within the ranges reported by harmonised life-cycle assessments and recent assessments by the IPCC, IRENA and NREL. The conventional top-down representation, by contrast, produced irregular and dispersed regional patterns, and in some cases implausible results, because without explicit manufacturing stages it assigned embodied emissions to generic domestic sectors such as electricity generation and construction. The hybrid model also reproduced producer prices of solar electricity more consistently against IRENA levelized-cost benchmarks. A key methodological finding is that conventional input–output models systematically underestimate the footprint of capital-intensive technologies like photovoltaics because the embodied impacts of productive capital, including the modules themselves, do not propagate into per-unit footprints unless capital is explicitly endogenised.

The decomposition of the footprint reveals where the carbon actually lives in a solar panel’s life. Electricity is the single largest contributor, reflecting the carbon-intensive grids powering upstream stages such as polysilicon, ingot and wafer production. Coal-fired power alone accounts for roughly 38 percent of the EU’s photovoltaic electricity footprint, rising to nearly 45 percent when coal extraction is included, and about 58 percent of the EU footprint originates in China. Each stage of the chain inherits most of its footprint from the stage immediately upstream — between 60 and 95 percent in both the EU and China — so delivered solar electricity is dominated by inherited manufacturing impacts: about 74 percent of the 51 grams per kilowatt-hour in the EU27 and 62 percent of the 65 grams in China. This cascading structure is precisely why relocating downstream assembly changes so little of the total footprint as long as upstream stages stay abroad.

When the researchers ran the Net Zero Industry Act scenario, comparing a 2030 baseline against a 2030 configuration in which 40 percent of module and upstream demand is met domestically, the reconfiguration proved strikingly uneven. EU module output rises from below 1 percent to about 10 percent of global production, but the EU share of cells, wafers, ingots and polysilicon remains at only a few per cent or less. European module factories would continue to rely heavily on imported intermediate inputs from Asia–Pacific regions, and the share of the EU’s photovoltaic electricity footprint originating within the EU climbs only from about 16 percent to 22 percent — meaning nearly 80 percent of embodied emissions remain tied to imported upstream stages even under the policy.

The economic picture is similarly asymmetric. EU value added increases by approximately €4 billion, with roughly half arriving as employee compensation, indicating that expanded module manufacturing, installation and downstream activities are relatively labour-intensive. China experiences the largest absolute loss, about €3.5 billion or 0.06 percent of its GDP, while South Korea, India and other suppliers of intermediate components benefit indirectly. Employment tells a similar story with a sharp asymmetry: the EU gains about 65,000 jobs while China loses about 229,000, a gap reflecting the fact that the Chinese industry spans an integrated set of upstream and downstream stages whereas the reshoring scenario expands mainly downstream activities in Europe. A substantial share of the additional European activity still leaks abroad through continued imports of cells, wafers, polysilicon and key materials such as glass, aluminium and precious metals.

The sensitivity analysis tested whether these findings were artefacts of scenario design. Sweeping the EU domestic share of upstream photovoltaic stages from 0 to 100 percent showed both the footprint and the recovered value responding smoothly, with no threshold at which leakage stops. Even full upstream reshoring would lower the EU footprint only from 42.8 to 39.9 grams of CO2-equivalent per kilowatt-hour, and the 40 percent target captures about €2 billion of the roughly €7 billion of value added recoverable under complete upstream reshoring. Physical parameters mattered too: for the EU, module efficiency is the dominant uncertainty, cutting the footprint by up to 14 percent at 24 percent efficiency, while for China the capacity factor dominates, with a 19 percent swing reflecting divergent yield estimates for Chinese sites.

The authors conclude that the Net Zero Industry Act should be understood primarily as an industrial capacity and supply-chain resilience policy rather than a climate instrument or a macroeconomic stimulus. The roughly 0.6 megatonnes of CO2-equivalent saved — about 5 percent of EU photovoltaic-related emissions and 0.02 percent of total EU greenhouse-gas emissions — largely reflect a geographic redistribution of manufacturing emissions rather than net global abatement, especially since photovoltaic electricity is already low-carbon and the environmental advantage of European manufacturing is likely to narrow as China’s grid decarbonises. If domestic value creation is the goal, the researchers argue, policy support should extend selectively to the electricity-intensive polysilicon, ingot and wafer stages that currently remain offshore, and the industrial strategy should be aligned with climate instruments such as the EU Emissions Trading System and the Carbon Border Adjustment Mechanism.

Beyond the specific policy verdict, the study carries a broader methodological message for anyone assessing clean-energy industrial strategy. Reshoring’s downstream concentration, persistent upstream import dependence, and the redistribution of emissions and value added across regions would be poorly captured by conventional models in which photovoltaic electricity generation is decoupled from its manufacturing chain. By resolving every stage from sand to silicon to module, the hybrid framework traces policy shocks along the global chain and exposes spillovers, bottlenecks and trade dependencies that aggregated models miss entirely. As the United States and India pursue parallel re-regionalisation of clean-energy supply chains, the finding that resilience comes at the price of modest climate and economic returns is likely to resonate far beyond Brussels.

Subject of Research: Environmental and socio-economic assessment of solar photovoltaic manufacturing reshoring in the EU under the Net Zero Industry Act using a hybrid input–output life-cycle model.

Article Title: Environmental and socio-economic implications of solar photovoltaic reshoring under the EU Net Zero Industry Act: a hybrid input–output assessment

Article References: Rinaldi, L., Merletti, R., Citterio, C., Golinucci, N., & Rocco, M. V. (2026). Environmental and socio-economic implications of solar photovoltaic reshoring under the EU Net Zero Industry Act: a hybrid input–output assessment. Journal of Industrial Ecology. https://doi.org/10.1007/s44498-026-00175-0

Image Credits: AI Generated

DOI: 10.1007/s44498-026-00175-0

Keywords: solar photovoltaics, Net Zero Industry Act, reshoring, hybrid life-cycle assessment, EXIOBASE, input–output model, carbon footprint, supply chain, value added, employment, EU industrial policy, photovoltaic manufacturing