CN-17:Energy Performance Contracting and Energy Service Companies (ESCOs)
Throughout 2010, China ramped up its support for ESCOs with a number of fiscal and tax incentive policies as well as some standardization requirements for the companies. Energy Performance Contracting, among other market mechanisms, is a key focus for the Chinese government in the 12th Five Year Plan.
Throughout 2010, China ramped up its support for Energy Service Companies (ESCOs) with a number of fiscal and tax incentive policies as well as some standardization requirements for the companies. Energy performance contracting (EPC), among other market mechanisms, is a key focus for the Chinese government in the 12th Five Year Plan. 
In April 2010, the National Development and Reform Commission (NDRC), Ministry of Finance (MOF), People's Bank of China, and General Tax Bureau released "Opinions on Acceleration of the Promotion of Energy Performance Contracting and Development of Energy Efficiency Service Industry". This document basically served to fully acknowledge the growing role of EPC and set qualitative targets and guidelines for 2012 and 2015 with regard to the growth and maturation of the industry. 
In June 2010, MOF and NDRC released a new fiscal reward policy for ESCOs running shared savings projects, whereby the ESCO puts up the initial investment and the money saved is shared between the ESCO and the client. The ESCOs are required to first officially register with the NDRC and have equipment and statistical systems in place to measure resultant energy savings.  In October 2010, the NDRC and MOF released a "first batch" list of 462 ESCOs who qualified to apply for the fiscal rewards. 
In August 2010, China's National Standardization Management Committee released a national standard on EPC that became effective on January 1, 2011, setting the technical requirements for EPC projects and offering a template for energy performance contracts. 
Finally, on December 31, 2010, the MOF and General Tax Bureau released a set of new tax policies for ESCOs effective immediately. 
Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.
Policy Instrument Type: Economic, Incentives & Subsidies
Position in the PyramidAbout Us
Start Date: 2010
|Supports||Energy and Carbon Intensity Targets of the 12th Five Year Plan||Effort Defining|
|Supported By||Financial Rewards for Energy-Saving Technical Retrofits||Supporting Measure|
Ministry of Finance
National Development and Reform Commission
Primary Objective: Energy
To standardize the Energy Performance Contracting industry and provide fiscal incentives to qualified projects
Energy Service Companies (ESCOs)
Driver of energy consumption or emissions affected by policy:
Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.
Quantitative Target? no
Progress Monitored? yes
Verification Required? yes
Requirements on the Target Group
Support by Government
Under the fiscal reward policy, qualified EPC projects will receive CNY 240 per ton of coal equivalent energy (tce) saved from the federal government and at least CNY 60/tce from local governments, with some opting to pledge more.  It was estimated that about CNY 2 billion had been rewarded to EPC projects by the end of 2010. 
The new tax policies implemented on January 1, 2011 include exemption from turnover and value added taxes for ESCO contracts meeting specified criteria. Additionally, qualified ESCOs would be exempt from income tax for the first three years of a project and subject to only 50% of the income tax rate the second three years of that project. 
Lists of registered ESCOs in China
Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.
|Impact||Quantitative Estimate||Qualitative Estimate|
|Estimated effect on energy consumption or emissions||Unkown||Unknown|
|Estimated costs/benefits for industry||Unknown||Unknown|
|Estimated cost for government||Unknown||Unknown|
References & Footnotes
 Sun, Xiaoliang; Zhu, Lin; Taylor, Bob. "China's ESCO industry: Saving More Energy Everyday Through the Market" May 31, 2011 http://ryanschuchard.files.wordpress.com/2011/06/chinas-esco-industry-2010.pdf
 Ministry of Finance, NDRC. "Temporary method for management of energy performance contracting project government budgeted award funds." http://jjs.mof.gov.cn/zhengwuxinxi/zhengcefagui/201110/t20111028_603164.html
 Ministry of Finance, NDRC, People's Bank of China, General Tax Bureau. "Opinions on the accelerating the promotion of energy performance contracting and development of energy efficiency service industry."
 Ministry of Finance, NDRC. "Clarifications on financial support for energy performance contracting projects" http://www.sdpc.gov.cn/zcfb/zcfbtz/2010tz/t20101022_376434.htm
 Ministry of Finance, General Tax Bureau. "Related policy questions on value added tax and income tax with regard to advancing the energy performance contracting industry" http://www.gov.cn/zwgk/2011-02/17/content_1804866.htm
 China's National Standardization Management Committee. "General technical rules for energy performance contracting" http://hzs.ndrc.gov.cn/newzwxx/W020101022527867354130.pdf
 Xinhua News. "China's EPC industry value reaches CNY 60bn" http://www.ccchina.gov.cn/cn/NewsInfo.asp?NewsId=26501