China's allegation that renewable energy subsidies in five US states violate free-trade rules ratchets up a potentially costly trade war between the world's two largest economies.

Programmes supporting renewable power, including wind and solar, in Washington state, New Jersey, Massachusetts, Ohio and California, violate World Trade Organisation policies and trade treaties, according to China's Ministry of Commerce. China has filed a complaint at the WTO over US procedures for calculating anti-subsidy duties on imports.

Those announcements followed a preliminary decision by the US Commerce Department to impose tariffs of as much as 250 per cent on imports of Chinese solar cells.

The agency said the units were being sold for less than the cost of production in an attempt to drive out domestic competition.


At least four US solar manufacturers filed for bankruptcy in the past year even as federal subsidies helped build a US$8.4 billion US solar market.

China's official Xinhua News Agency reported that 14 of China's solar-panel companies have formed an alliance in response to the trade issues with the US.