The Impact of VAT Preferential Policies on the Profitability of China’s New Energy Power Generation Industry

Wang Ying () and Igor A. Mayburov
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Wang Ying: Institute of Economics and Management, Ural Federal University Named after the First President of Russia B.N. Yeltsin, Yekaterinburg 620062, Russian Federation
Igor A. Mayburov: Institute of Economics and Management, Ural Federal University Named after the First President of Russia B.N. Yeltsin, Yekaterinburg 620062, Russian Federation

Energies, 2025, vol. 18, issue 14, 1-36

Abstract: To achieve climate goals and promote clean energy, China has introduced preferential VAT policies to promote the development of renewable energy power generation industries, but their actual impact on corporate profitability remains underexplored. This study innovatively applies a DID approach, enhanced with PSM and dynamic modeling, to evaluate the causal effects of VAT incentives on firm ROE. Using panel data from 98 listed power generation companies between 2010 and 2024, this study distinguishes treatment effects across the wind, solar, and hydrogen sectors, revealing significant heterogeneity. Unlike prior studies, it further investigates time-lagged impacts and fiscal efficiency indicators to assess policy sustainability. Results show that VAT incentives significantly enhance ROE for wind and solar firms, while the hydrogen sector exhibits weaker responses. These findings 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. This study provides empirical evidence for the design of China’s fiscal energy policy to maximize the growth of the renewable energy sector. More broadly, this study provides lessons for global green transition policies, illustrating how well-designed fiscal incentives can support sustainable energy development worldwide.

Keywords: VAT incentives; new energy firms; tax policy; PSM-DID; corporate profitability; policy optimization; global energy transition (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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