China&#39;s policies fuel its renewable energy sector, report says

The Chinese government has helped turn the country into an alternative energy powerhouse using a slew of policies that support domestic renewable fuel industries, according to a study released Monday.

A sweeping mix of preferential financing, rebates, tax incentives and subsidies for Chinese-owned and -controlled clean-tech companies between 2002 and 2009 was implemented as the country faced rising energy consumption, according to the report from the National Foreign Trade Council.

Policies include the 2005 measure that required wind farms in China to be built using at least 70% locally produced materials, which pushed several international companies to establish manufacturing facilities in the country. Chinese utilities must buy all renewable energy generated in the country and then offer the power to consumers at a discount, according to a 2006 law.

A $586-billion stimulus package from 2008 allocated significant funds to renewable energy projects, and a 2009 program offered 50% investment subsidies for solar power systems connected to the national grid.

China is turning into a major production base for electricity generated from hydropower, wind, biomass and solar sources at a rapid clip and on a significant scale, according to the report.

The number of wind turbine producers has soared to more than 100 in 2009 from about 25 in 2007. China also became the largest manufacturer of solar panels in the world in 2008, responsible for a third of global shipments.

The country used to depend on foreign equipment and technology to produce renewable energy but now seems poised to rely mostly on equipment developed and made domestically using Chinese standards, the report said. The study did not discuss complaints that Chinese policies on alternative power violate international trade rules.

At current extraction rates, China?s indigenous oil and natural gas reserves will be sucked dry within two decades, according to the study, which was written by the International Trade Group of law firm Dewey & LeBoeuf. The country surpasses even the U.S. in carbon dioxide emissions.

-- Tiffany Hsu