The Impact of Government Subsidies on the Renewable Energy Industry

Abstract

Since the implementation of reform and opening-up, China’s economic development has achieved remarkable accomplishments. However, alongside rapid economic growth, fossil fuel consumption has surged significantly, exacerbating environmental challenges. Consequently, the government has introduced subsidies for the new energy sector—specifically renewable energy industries—to intervene in the market and optimise the energy structure. Existing research has primarily focused on identifying the direct impact of subsidies on the industry, such as their effect on industrial profits and changes in the share of renewable energy following subsidy provision. Therefore, the objective of this paper is to first establish the relationship between the proportion of industrial gross output value in total GDP and the elasticity of energy structure transformation. Subsequently, an assessment framework for policy exit timing will be constructed to determine the optimal moment for the government to phase out subsidies.