China

CN-17:Energy Performance Contracting and Energy Service Companies (ESCOs)

Policy Description

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.

Description

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. [1]

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. [3]

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. [2] In October 2010, the NDRC and MOF released a "first batch" list of 462 ESCOs who qualified to apply for the fiscal rewards. [1]

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. [6] 

Finally, on December 31, 2010, the MOF and General Tax Bureau released a set of new tax policies for ESCOs effective immediately. [5]

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 Categorisation

Policy Instrument Type: Economic, Incentives & Subsidies

Position in the Pyramid

About Us

Participation: Voluntary

Period

Start Date: 2010

Policy Linkages

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

Agencies Responsible

Ministry of Finance
National Development and Reform Commission

Primary Objective: Energy

Objective

To standardize the Energy Performance Contracting industry and provide fiscal incentives to qualified projects

Target Group

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.

Coverage

Quantitative Target? no

Progress Monitored? yes

Verification Required? yes

Enforced? no

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. [2] It was estimated that about CNY 2 billion had been rewarded to EPC projects by the end of 2010. [7]

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. [5]

Implementation Toolbox

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

References

[1] 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

[2] 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

[3] 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."

[4] Ministry of Finance, NDRC. "Clarifications on financial support for energy performance contracting projects" http://www.sdpc.gov.cn/zcfb/zcfbtz/2010tz/t20101022_376434.htm

[5] 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

[6] China's National Standardization Management Committee. "General technical rules for energy performance contracting" http://hzs.ndrc.gov.cn/newzwxx/W020101022527867354130.pdf

[7] Xinhua News. "China's EPC industry value reaches CNY 60bn" http://www.ccchina.gov.cn/cn/NewsInfo.asp?NewsId=26501