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Effect of government subsidies on renewable energy investments: The threshold effect

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  • Yang, Xiaolei
  • He, Lingyun
  • Xia, Yufei
  • Chen, Yufeng

Abstract

By considering 92 renewable energy listed enterprises in China between 2007 and 2016 as sample, this paper constructs a panel threshold effect model to investigate the threshold effect of government subsidies on renewable energy investment and further explores the effects and differences regarding government subsidy types and enterprise size on the threshold effect. The results show that, first, government subsidies have a positive threshold effect on renewable energy investment of China. When energy consumption intensity and bank credit are greater and the level of economic development is less than the threshold value, the contribution of government subsidies to renewable energy investment is significantly enhanced. Second, monetary subsidies and tax incentive policies can promote renewable energy investment, but the effect of tax incentives is more significant. Third, government subsidies are the main force supporting the development of medium-, small-, and micro-sized renewable energy enterprises. On the basis of these results, the Chinese government should strengthen policy support in those areas with high economic costs of energy transition, encourage the investment in renewable energy in large-sized enterprises, play a policy-guiding role, and focus on strengthening subsidies for medium-, small-, and micro-sized enterprises.

Suggested Citation

  • Yang, Xiaolei & He, Lingyun & Xia, Yufei & Chen, Yufeng, 2019. "Effect of government subsidies on renewable energy investments: The threshold effect," Energy Policy, Elsevier, vol. 132(C), pages 156-166.
    • Handle: RePEc:eee:enepol:v:132:y:2019:i:c:p:156-166
    DOI: 10.1016/j.enpol.2019.05.039
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