In a groundbreaking study published in the journal *Energies*, researchers have uncovered the nuanced impact of China’s value-added tax (VAT) preferential policies on the profitability of its burgeoning new energy power generation industry. Led by Wang Ying of the Institute of Economics and Management at Ural Federal University in Russia, the research provides a fresh perspective on how fiscal incentives can drive the growth of renewable energy sectors, offering valuable insights for policymakers and energy firms worldwide.
The study, which analyzed panel data from 98 listed power generation companies between 2010 and 2024, employed a sophisticated combination of Difference-in-Differences (DID) approach, Propensity Score Matching (PSM), and dynamic modeling to evaluate the causal effects of VAT incentives on firm Return on Equity (ROE). This methodology allowed the researchers to distinguish treatment effects across the wind, solar, and hydrogen sectors, revealing significant heterogeneity in the impact of these policies.
“Our findings show that VAT incentives significantly enhance ROE for wind and solar firms, while the hydrogen sector exhibits weaker responses,” Wang Ying explained. This heterogeneity underscores the importance of tailoring fiscal policies to the specific needs and characteristics of different renewable energy sectors.
The study also investigated time-lagged impacts and fiscal efficiency indicators to assess the sustainability of these policies. The results not only confirm the effectiveness of targeted tax incentives but also offer new insights for refining fiscal policies to better support sector-specific transitions toward renewable energy.
The implications of this research are far-reaching. For the energy sector, understanding the differential impacts of VAT incentives can help companies strategize their investments and operations more effectively. For policymakers, the study provides empirical evidence for designing fiscal energy policies that maximize the growth of the renewable energy sector.
As the world grapples with the urgent need to transition to sustainable energy sources, this research offers a roadmap for how well-designed fiscal incentives can support this global green transition. “This study provides lessons for global green transition policies, illustrating how well-designed fiscal incentives can support sustainable energy development worldwide,” Wang Ying noted.
In an era where the stakes for climate action are higher than ever, this research serves as a beacon, guiding the way toward a more sustainable and profitable future for the energy sector. By providing a comprehensive analysis of the impact of VAT preferential policies, it paves the way for more informed decision-making and strategic planning in the renewable energy landscape.