Energy Subsidies in China
The GSI’s program of work in China undertakes research and policy engagement on subsidies for fuel consumers, fuel producers and renewable energy, with the intention of contributing to the following policy objectives:
- Reduce expenditure on fossil fuel subsidies that promote unsustainable environmental and social impacts
- Reform subsidies to level the playing field for clean energy
- Improve the fair social distribution of subsidy expenditure
In carrying forward this work, the Global Subsidies Initiative has collaborated with a number of organizations, including the Energy Research Institute (ERI), China National Renewable Energy Centre (CNREC) and the Energy Foundation China (EF China).
This policy brief identifies the commonalities that China and India face with respect to fossils fuel subsidies and their reform and identifies specific examples of good practice in each country. In doing so, it seeks to facilitate cross-border lessons—not only between India and China, but also between these two countries and the rest of the world.
This blog addresses how both countries can do more to ensure that policies on air pollution and clean energy are aligned.
Subsidies provide an advantage to coal generation over other technologies. The 2016 G20 subsidy peer review was a major step towards transparency, particularly for oil and gas subsidies. However, it did not include an analysis of the subsidies to coal-fired electricity generators. It is recommended that policy-makers expand the scope of the subsidy review processes to include the subsidies described here. This report seeks to assess the cost to the Chinese government, in terms of subsidies, of operating and investing in coal-fired electricity generators, the predominant source of electricity in China.
Over the last 10 years, China has seen an unprecedented deployment of wind power, with capacity growing from 1.26 gigawatts (GW) in 2005 to 91.4 GW at the end of 2013. This report takes a closer look at the drivers behind the impressive wind power development in China. In particular, it considers two related problems that have been encountered—curtailment of generation and delays in connection of projects—and how these are being addressed. The report aims to identify lessons to be learned to inform future policy measures in China and elsewhere.
This report offers a summary of several countries’ experiences implementing energy policy shifts in an area of particular interest to China: the transition away from coal to cleaner fuels and a low-carbon economy. Using IISD’s “window of opportunity” framework, these case studies are analyzed in terms of the four critical elements of success: context, champions, concerns and complementary policies.
Subsidies to Coal Production in China provides a detailed inventory of coal subsidies, identifying an estimated CNY 35.7 billion (USD 5.8 billion) in 2013. A further subsidy in the form of credit support was estimated to be between CNY 3.5 and 35.7 billion (USD 0.57 billion and USD 5.8 billion). The major subsidies include tax relief, investment in assets, compensation for mine closures and direct payments. The report finds that more transparency is needed to aid the process of subsidy reform in line with the government policy to reduce coal consumption.
The cost to society of coal use includes the financial cost of providing subsidies to the coal industry in addition to the cost of externalities. Coal and Renewables in China explores the cost of coal in terms of subsidies and externalities and discusses the extent to which coal subsidies act as a barrier to the development of renewable energy. It finds that China is supporting the coal industry through the provision of billions of dollars’ worth of subsidies to consumers and producers. In addition to the financial cost, these subsidies increase the consumption of coal, producing externalities including air pollution and greenhouse gas emissions.
As part of a project jointly prepared by the Global Subsidies Initiative (GSI), Oil Change International (OCI) and the Overseas Development Institute (ODI), this country study and accompanying data sheet compiles publicly available information on subsidies to oil, gas and coal production in China. It is one of the background papers to the report Empty Promises: G20 Subsidies to Oil, Gas and Coal Production.
In October 2010, China introduced a tiered electricity pricing (TEP) reform for the residential sector, in accordance with an official document (No.  2617) issued by China’s National Development and Reform Commission. Previously, households were charged a flat rate, which varied by province, regardless of how much each consumed. This paper reviews and evaluates the TEP reform, examining the impacts on equity, efficiency and subsidy expenditure. It also looks at how problems associated with the reform were addressed, and the form and mode of communication with stakeholders.
China's economy continues to grow rapidly with corresponding increases in both energy consumption and environmental pollution. Renewable energy is a key part of China's response to this challenge. The current costs of measures to facilitate the large-scale deployment of renewable energy are primarily met through an electricity surcharge—effectively a tax on electricity consumption. However, concerns have been raised that continuing to rely on the surcharge alone places a disproportionate burden on electricity consumers. The need for further debate how best to fund renewable energy and reduce environmental pollution was identified by the IISD and the Centre for New and Renewable Energy in China (CNREC), leading to the establishment of a research project to examine the international experience of similar schemes and their relevance to China. This report presents a summary for policy-makers of the findings of that research.
This paper focuses on deployment subsidies for onshore wind power in one emerging economy, China, and one Western European economy, Germany. Its primary goal is to better inform debates about cost-effectiveness by exploring the methods required to assess cost-effectiveness and by estimating the general magnitude and range of benefits in several key areas.
This report finds that China provided a total of RMB 780 million (US$ 115 million, roughly US$ 0.40 per litre) in biofuel subsidies in 2006. Total support is expected to reach approximately RMB 8 billion (US$ 1.2 billion) by 2020, according to official sources. This is likely to be a significant underestimate, as it does not include support to feedstocks, such as the RMB 3000 (US$ 437) per hectare per year available from 2007 for farmers growing feedstock on marginal land. Even under the most optimistic scenarios for Chinese biofuel production, soaring private vehicle ownership means domestic production of biofuels would have a negligible effect in reducing China’s oil consumption or increasing energy security. The net benefits for pollution reduction also appear to be limited and the potential for negative unintended consequences is high, including for vulnerable rural communities.