Research Of Financial Policy And Taxations To Promote Renewable Energy Development

[Abstract] Energy is essential for the existence and development of mankind and its civilization. As the reserve of traditional fossil fuels are becoming limited and the environmental disasters arise thereof become common place, people are getting more and more aware of the importance of substituting the fossil fuels with renewable clean energies.Wind, solar, small scaled hydro, biomass are in the list of renewable energies. With the introduction of new technologies, it becomes possible to develop renewable energy resources in cost effective manner with large scale. The renewable energy industry that attracts billions of public and private investment is becoming strategically important for every country around the globe.China is a vast country with limited fossil energy reserve. Traditional fossil energy that still dominates its energy consumption and drives its fast growing economy is also pressuring China with environmental pollution, climate change problems and criticism from international community. As the largest developing country in the world China has no choice but to move ahead in the environmental friendly way for a sustainable growth. And the choice is decreasing the use of fossil and increasing renewable energy share.Present estimation shows that China has sufficient renewable energy resource that could help the nation to complete its modernization and urbanization process without great difficulties, and at the same time easing the conflict of economic development and environmental protection when rationally developed.While China has to rely on traditional fossil energy for quite a certain period to support its economic growth, it should be aware that transiting from the traditional fossil fuels to renewable energy is not an overnight task, but a time-consuming job that might last decades of time.Government policies in financing and taxation will have great impact on the development of renewable energy and suitable policy will promote the quick growth of renewable energy development. Appropriate government policy will attract more investors to venture in new energy development and put the new development in correct and healthy track. Chinese government has already been providing policy and financing support to encourage investment to join the renewable energy development.Until commercialization, renewable energy development normally undergoes research, piloting, industrialized experiment stages. Financial and taxation policies have to be arranged in such a way that the requirement at different stages could be met and the development of renewable energy will not be affected.During the initial stage when the renewable energy is still at research, it needs the government to take main responsibility to provide policy and financial support. In addition, government coordination plays a very important role in promoting new technology and attracting investment for renewable energy development. Other factors may also be considered when making policies:comprehensive investigation of renewable energy resource, general development planning, introduction of sufficient financing and technologies, availability of renewable energy technologies, Financing support should focus on research, piloting and experiment stages, and proper taxation policy is more important when commercialized.Furthermore, even at the same time, different policies will be applied to different types of renewable energy at different development stages. According to the present situation in China in terms of renewable natural resources, renewable energy technologies and the market, the strategy for renewable energy development is to develop small-scaled hydropower stations and wind farms as the top priority, followed by developing solar, biomass and geothermal energy, and ocean energy will be developed with caution.An analysis into the current economic efficiency and policy conditions for renewable energy in China shows that in spite of the great achievements made in renewable energy, almost all policies have to be optimized to match the quick development of renewable energy. Major optimization efforts should be placed on the lack of unified coordination, slow legislation, deficiency in resource investigation, assessment and project planning, lack of environmental benefits of resources, insufficient financial and tax policy support, unclear policy target, lack of regular assessment, amendment and adjustment system, low efficiency at renewable energy fund management and etc.Looking at the future development of renewable energy in China, a projection at the balance of payment of the future volume of renewable energy development fund, one of the major sources of renewable energy subsidy, demonstrates that renewable energy fund is not sufficient enough to meet the need for subsidy for future projects. As the thermal power plants are in serious deficit, it is a pressing task to solve the tariff problems. Otherwise, the healthy development of renewable energy will be affected. It is impossible for the thermal power plant, which account for a big percentage of power market to operate at big loss and at the same time the renewable energy enjoys a booming development.Currently, the external cost of the saving of fossil fuels and more environmentally friendly has not been explicitized. Based on current technical conditions and relevant transactions in international market, we measure the external cost of resources and environment in internal cost dimensions. The result shows that in the caliber of full cost, the price for current renewable energy is no higher than that of traditional energy. Moreover, as restraints on resources and environment further enhance, coupled with technical advancement and expansion of scale, the price of renewable energy will become more competitive.In addition, the development of renewable energy has the feature of suiting to the local circumstances. Currently, financial and tax policies on the development of distributed renewable energy are still vacant, market policies in compliance with the self characteristics of renewable energy (distributed energy) have to be set up urgently. The incentive policies to promote the development of distributed renewable energy should be set up and polished as quickly as possible.In order to maintain the sustainable development of the renewable energy in China, a couple of policy and legal issues have to be optimized, including the backup of the information system, coordination with upper, lower and other related sectors, introduction of market-oriented mechanism, comprehensive policy guidance, and regular assessment of implemented policies.It is also to be clearly defined before providing financial assistance. Taxation regulations (including VAT, income tax, business tax) must also be updated to facilitate the development of the renewable energy. Resource taxation and carbon taxation must be gradually introduced to match the development of the renewable energy, and the early the better to impose such taxesIn addition to the legal and financial support of the renewable energy development, other issues must also be addressed including assessment of renewable energy resource, general planning, government coordination to encourage power and grid companies to invest and accommodate the renewable energy with reasonable tariff, investment from capital market and financial market will also promote the healthy development of the renewable energy.The article uses examples to emphasize the importance and urgency in developing renewable energy in China and at the same time the importance of preserving natural resources, protecting environment and preventing climate change. The role of government support in financing and regulation and the future prospective of renewable energy development are also discussed in the article.