To implement the major strategic decisions of the Party Central Committee and the State Council on peaking carbon emissions and achieving carbon neutrality, the Ministry of Finance has issued the “Opinions on Financial Support for Effectively Carrying Out Work Related to Peaking Carbon Emissions and Achieving Carbon Neutrality” (Cai Zi Huan [2022] No. 53, hereinafter referred to as the “Opinions”). Recently, a responsible official from the Ministry of Finance answered questions from reporters regarding the contents of the “Opinions.”

Answer: Achieving carbon peak and carbon neutrality is a major strategic decision made by the Party Central Committee with Comrade Xi Jinping at its core, in light of the overarching domestic and international contexts. It bears on the sustainable development of the Chinese nation and the building of a community with a shared future for mankind, and represents the only path for China to promote high-quality development in the new stage of development. As one component of the “1+N” policy framework for achieving carbon peak and carbon neutrality, the Opinions serve as a top-level design document through which the fiscal authorities implement the major decisions and arrangements of the Party Central Committee and the State Council, and constitute an important institutional guarantee for realizing these goals. The issuance of the Opinions will help clarify the objectives of fiscal support for carbon peak and carbon neutrality, guide fiscal officials at all levels to elevate their political awareness, align their thinking, and pool their efforts to advance this work; facilitate the identification by fiscal departments at all levels of the priority areas and sectors for supporting carbon peak and carbon neutrality, enabling them to pinpoint key leverage points and accelerate the establishment and improvement of a fiscal and tax policy system that promotes efficient resource utilization and green, low-carbon development; and harness the synergistic effects of various policies—including fiscal funding, taxation, and government procurement—to create a coordinated working mechanism characterized by vertical linkage within the fiscal system and horizontal collaboration with other government departments, thereby effectively advancing the realization of the carbon peak and carbon neutrality targets.

2. Question: What is the overall framework and main content of the “Opinions”?

Answer: The Opinions are grounded in the current stage of development and place particular emphasis on supporting efforts to achieve carbon peaking. They propose a comprehensive package of fiscal policy measures—ranging from the targeted allocation of budgetary funds and tax incentives to diversified investment mechanisms and green government procurement—to ensure adequate financial support. The document is structured into four main sections. First is the General Requirements, which sets out the guiding principles, working guidelines, and key objectives for leveraging fiscal support to advance carbon peaking and carbon neutrality. Second is the Priority Areas and Sectors for Support, which identifies six key areas: building a clean, low-carbon, safe, and efficient energy system; promoting green and low-carbon transformation in priority industries and sectors; advancing innovation in green and low-carbon technologies and strengthening foundational capacity; fostering green and low-carbon lifestyles and resource conservation and efficient use; consolidating and enhancing carbon sink capacity; and improving the green and low-carbon market system. Third is the Fiscal Policy Measures, which encompass five aspects: strengthening the guiding role of fiscal funding; establishing sound market-based and diversified investment mechanisms; harnessing the incentive and regulatory functions of tax policies; refining green government procurement policies; and intensifying international cooperation on climate change. Fourth is the Supporting Measures, which consist of four specific components: reinforcing accountability and implementation; enhancing coordination and collaboration; tightening budgetary management; and stepping up education and public awareness-raising.

3. Question: What are the principles guiding fiscal support for efforts to achieve carbon peak and carbon neutrality?

Answer: The Opinions set forth four guiding principles. First, ground efforts in the present while keeping a long-term vision. In pursuit of the timely achievement of the carbon peak and carbon neutrality goals, we will strengthen the alignment of fiscal support policies with the National 14th Five-Year Plan Outline, seize the critical period and window of opportunity for carbon-peaking work during the 14th Five-Year Plan period, ensure that proactive fiscal policy is more effective, place greater emphasis on precision and sustainability, and make sound plans for the fiscal policy framework supporting carbon peaking and carbon neutrality. Second, tailor measures to local conditions and promote coordinated progress. Local finance departments shall take into account their respective institutional foundations and actual circumstances, advance work in a steady and orderly manner, adopt differentiated approaches, and formulate and implement fiscal support measures that both reflect local realities and meet overarching requirements. We will also enhance the unified allocation of fiscal resources and institutionalize the direct-delivery mechanism for fiscal funds. Furthermore, we will promote synergistic implementation of policies related to funding, taxation, and government procurement to boost the effectiveness of fiscal policy. Third, focus on outcomes and reward excellence while penalizing underperformance. We will strengthen budgetary discipline and performance management: the central government will provide reward-based support to regions that achieve outstanding results in advancing relevant work, while appropriately reducing transfer payments to regions that are not sufficiently proactive or fail to deliver noticeable results, thereby establishing an incentive-and-restraint mechanism. Fourth, enhance exchanges and ensure smooth communication both domestically and internationally. Adhering to the principles of common but differentiated responsibilities, equity, and respective capabilities, we will intensify multilateral and bilateral international financial and economic dialogue, exchange, and cooperation; coordinate domestic and international resources; promote advanced green and low-carbon technologies and best practices at home and abroad; engage deeply in global climate governance; and actively seek international resource support.

4. Question: How can we ensure that the “Opinions” are effectively implemented?

Answer: The Ministry of Finance will provide guidance to local finance departments to ensure effective implementation of the requirements set forth in the Opinions, with a particular focus on the following key areas. First, intensify publicity and implementation efforts. Local finance departments will be guided to align their thinking and elevate their political awareness, thoroughly study and grasp the major strategic decisions of the Party Central Committee, integrate the promotion of carbon peaking and carbon neutrality into the overall fiscal work at all levels, refine learning and training programs, and foster a positive environment for green and low-carbon development. Second, strengthen accountability. Provincial-level finance departments will be guided to improve working mechanisms, formulate region-specific fiscal policies and measures to support carbon peaking and carbon neutrality, cascade responsibilities down through all levels, clearly define divisions of labor, and enhance oversight and guidance over city- and county-level finance departments, which are responsible for implementing these initiatives within their respective administrative jurisdictions and ensuring the effective execution of higher-level policies. Third, enhance coordination and collaboration. Efforts will be accelerated to establish and improve mechanisms for vertical coordination among finance departments at different levels and horizontal interaction between the finance sector and other government agencies, so as to include eligible carbon-peaking and carbon-neutral tasks within the scope of fiscal support, fully mobilize the enthusiasm of all relevant parties, and create synergies across sectors. Fourth, conduct ongoing monitoring and evaluation of outcomes. The efficiency of fiscal resource allocation and the effectiveness of funds dedicated to supporting carbon peaking and carbon neutrality will be continuously enhanced; performance evaluations of budgetary funds and routine oversight will be strengthened, and budgetary constraints will be made more rigid. Fiscal investment will be closely aligned with policy planning and specific task assignments, and oversight and evaluation of progress toward set targets and tasks will be reinforced.

5. Question: What measures has the Ministry of Finance already taken to support the efforts to peak carbon emissions and achieve carbon neutrality?

Answer: The Ministry of Finance adheres to Xi Jinping’s Thought on Ecological Civilization as its guiding principle, conscientiously implements the decisions and arrangements of the Party Central Committee and the State Council, continuously innovates and refines policies and institutional frameworks, and employs a comprehensive array of policy measures—including fiscal funding guidance, tax incentives, and government green procurement—to support and advance the goals of peaking carbon emissions and achieving carbon neutrality. First, we have strengthened financial guarantees and expanded support through multiple channels. In 2021, the central government enhanced resource coordination, optimized the expenditure structure, and allocated approximately RMB 350 billion in funds to support green and low-carbon development. Funding allocation has been prioritized to bolster key areas such as the promotion and application of clean energy, the low-carbon transformation of priority industries and sectors, technological innovation and capacity building, and the consolidation and enhancement of carbon sink capacity, thereby improving the precision and effectiveness of fiscal policies. Second, we have fully leveraged the incentive and regulatory functions of tax policies. On the one hand, we have effectively implemented tax policies that support environmental protection and green development. For instance, eligible new-energy vehicles are exempt from vehicle purchase tax and vehicle and vessel tax, encouraging green and low-carbon travel; moreover, the comprehensive implementation of the ad valorem taxation reform for mineral resources has promoted the rational exploitation of natural resources. On the other hand, we have optimized the tariff structure by reducing tariffs on certain environmentally friendly products, such as diesel-engine filtration devices, while applying zero or reduced tariffs to resource-based products and primary steel products, thus guiding and advancing green and low-carbon development. Third, we have promoted the establishment of a diversified financing mechanism. The National Green Development Fund has been used to mobilize social capital to support green development in the Yangtze River Economic Belt, leveraging financial instruments to accelerate the cultivation of market entities in the green-development sector and better serve the green transformation of the real economy. We have also standardized and orderly advanced public–private partnerships (PPPs) in the ecological and environmental protection field, harnessing the “small investment, big impact” leverage effect of fiscal funds. Fourth, we have continuously refined government green-procurement policies. The implementation mechanism for government procurement of energy-saving and environmentally friendly products has been improved: any product listed in the relevant catalog that has obtained the requisite national certification is entitled to mandatory and preferential procurement under government policy. Procurement entities’ responsibilities for green procurement have been firmly enforced, with green-procurement requirement standards being promoted and applied in sectors such as construction, express-delivery packaging, and commodity packaging, so as to ensure the effective realization of green-procurement policy objectives. Fifth, we have actively participated in the governance and cooperation of global environmental and climate-finance mechanisms. We have engaged constructively in negotiations on finance-related issues under the United Nations Framework Convention on Climate Change and the Paris Agreement, upholding the principle of common but differentiated responsibilities, safeguarding the principle of voluntary contributions by developing countries and their rights to access and utilize funds, and fostering an external environment conducive to achieving the goals of peaking carbon emissions and carbon neutrality. We have strengthened strategic guidance over the Global Environment Facility and the Green Climate Fund, and actively leveraged funding from international multilateral and bilateral institutions to support the achievement of the carbon-peaking and carbon-neutral targets.

6. Question: Through which main channels does the Ministry of Finance support the development of clean energy, and what are the next steps under consideration?

Answer: Supporting the development of a clean, low-carbon, safe, and efficient energy system is a crucial task for achieving carbon peak and carbon neutrality. The central government attaches great importance to this goal and has undertaken numerous initiatives that have yielded significant results. First, the fiscal subsidy policy for the promotion and application of new-energy vehicles has been effectively implemented. The Ministry of Finance, in coordination with relevant departments, has continuously refined the purchase-subsidy policy for new-energy vehicles, steadily raising the technical thresholds for eligibility, appropriately calibrating the pace and magnitude of subsidy reductions, and thereby fostering high-quality development of the new-energy vehicle industry. In 2021, China’s sales of new-energy vehicles reached 3.521 million units, a year-on-year increase of 160%, maintaining the world’s top position for the seventh consecutive year. At the end of 2021, the Ministry of Finance, together with relevant departments, issued a notice that, taking into account factors such as the industrial development plan for new-energy vehicles, market sales trends, and the need for a smooth transition for enterprises, explicitly stipulated that the purchase-subsidy policy for new-energy vehicles would be terminated on December 31, 2022. Second, a subsidy policy for renewable-energy power generation has been put in place. Since 2006, the central government has provided subsidies for renewable-energy power generation based on a fixed feed-in tariff, striving to promote the high-quality, leapfrog development of renewables. By the end of 2021, China’s installed capacity for renewable-energy power generation had reached 1.063 billion kilowatts, including 328 million kilowatts of wind power, 306 million kilowatts of photovoltaic power, and 37.98 million kilowatts of biomass power. In 2021, total renewable-energy power generation nationwide amounted to 2.48 trillion kilowatt-hours. Third, the exploration and utilization of unconventional natural gas are being encouraged. Since shale gas was included in the subsidy program in 2012, domestic production of unconventional natural gas has grown steadily for nine consecutive years. Starting in 2019, the scope of the subsidy has expanded to cover shale gas, coal-bed methane, tight gas, and other unconventional gas types. Adhering to the principle of “more output, more subsidy; more output in winter, more subsidy,” the subsidy for unconventional natural gas is structured as a tiered incentive system based on incremental production targets, with a results-oriented approach designed to encourage local governments and enterprises to increase gas production. With policy support, in 2021 the actual volume of unconventional natural gas extracted and utilized accounted for more than one-third of China’s total natural-gas output, serving as a key guarantee for boosting production. Fourth, efforts are being made to promote clean heating in northern regions during the winter. In recent years, the central government has allocated special funds for air-pollution prevention and control to support the implementation of clean-heating projects in northern China, successively including 88 cities in five batches under the funding program. These measures guide local authorities to tailor their approaches to the specific economic and social conditions of their respective regions, carrying out clean-heating upgrades and energy-efficiency retrofits of existing buildings in a prudent and orderly manner, thereby effectively reducing the consumption of loose coal, promoting synergistic pollution reduction and carbon mitigation, and advancing the green transformation of the energy structure.

7. Question: What are the main tax policies currently in place to support green and low-carbon development?

Answer: Since the 13th Five-Year Plan period, China has established a green tax system framework characterized by “multi-tax governance” through environmental protection tax, resource tax, and farmland occupation tax, coupled with a “multi-policy combination” of systematic tax incentives such as value-added tax and corporate income tax. Among the current tax system, the main taxes closely related to ecological and environmental protection include resource tax, consumption tax, value-added tax, income tax, vehicle acquisition tax, and vehicle and vessel tax. The policy design emphasizes both incentives for ecological conservation and innovative development and constraints on ecological damage and extensive growth; at the same time, it actively promotes tax and fee reductions to unlock policy dividends, thereby injecting strong momentum into high-quality local development. First, a consumption tax is levied on refined petroleum products to regulate energy consumption in the transportation sector. China implemented a reform of the refined petroleum tax and fee system in 2009 and has since raised the per-unit tax rate on refined petroleum products on multiple occasions. Second, differentiated consumption tax rates are applied, and exemptions or reductions are granted for vehicle acquisition tax and vehicle and vessel tax to encourage green and low-carbon travel. Based on the principle of “higher tax burdens for larger-displacement vehicles and lower burdens for smaller-displacement vehicles,” applicable consumption tax rates are set for passenger cars and motorcycles; new-energy vehicles are exempt from vehicle acquisition tax; new-energy vessels are exempt from vehicle and vessel tax, while energy-efficient vehicles benefit from a 50% reduction in vehicle and vessel tax. Third, an environmental protection tax was introduced in 2018 to reduce pollutant emissions. This tax is levied on four categories of pollutants: air pollutants, water pollutants, solid waste, and noise. As a result, key energy-consuming and emission-intensive enterprises in industries such as thermal power, steel, cement, and chemicals now face higher pollution discharge costs, which has played a positive role in encouraging clean production and promoting energy conservation and emission reduction. Fourth, since July 2016, a comprehensive reform has been implemented to base mineral resource taxation on ad valorem rates, thereby promoting the economical and intensive use of resources. Fifth, relevant tax incentives under value-added tax and corporate income tax are provided to guide enterprises in replacing fossil fuels with clean and renewable energy sources. Tax preferential policies for environmental protection, energy conservation, and water conservation have been refined, with the issuance of the “Catalogue of Corporate Income Tax Preferences for Environmental Protection, Energy Conservation, and Water Conservation Projects (2021 Edition)”; meanwhile, tax policies for comprehensive resource utilization have also been improved, with the release of the “Announcement on Improving the Value-Added Tax Policy for Comprehensive Resource Utilization” and the “Catalogue of Corporate Income Tax Preferences for Enterprises Engaged in Comprehensive Resource Utilization (2021 Edition).”

8. Question: What is the current status of the implementation of the Ministry of Finance’s government green procurement policy? What are the next steps under consideration?

Answer: In recent years, the Ministry of Finance has continuously refined the government’s green procurement policy, encouraging state organs, public institutions, and social organizations to actively procure and use green, low-carbon products. First, it has intensified mandatory and priority procurement of energy-saving and environmentally friendly products. The implementation mechanism for government procurement of such products has been improved: any product listed in the national catalog of energy-saving and environmentally friendly items that has obtained national certification is eligible for preferential procurement policies. In 2020, the share of energy-saving and environmentally friendly products in total government procurement of similar items reached over 85%, effectively boosting the development of related industries and playing a positive leading role in promoting green consumption across society. Second, the application of green buildings and green building materials has been promoted. Pilot projects have been launched in six cities, including Shaoxing, to use green building materials in public buildings such as hospitals and schools, while adopting new construction methods such as prefabrication and smart technologies; the total value of projects included in these pilots has reached RMB 102.5 billion. Third, a standards system for government green procurement requirements has been established. In collaboration with the Ministry of Ecology and Environment and the State Post Bureau, standards for express delivery packaging requirements have been formulated, specifying indicators such as heavy-metal content in packaging materials from the perspectives of greening, reduction, and recyclability, thereby guiding suppliers to use recyclable, organic, and renewable packaging products. Standards for government procurement requirements related to green data centers and printing/photocopying consumables are also being researched and developed. Fourth, green procurement of key products is being supported. The promotion and application of new-energy vehicles have been expanded, with the requirement that vehicles used for confidential communications, law enforcement and duty assignments on relatively fixed routes, and daily commuting should, in principle, be new-energy vehicles; Hainan Province has also been guided to conduct a pilot program for the mandatory procurement of domestically produced clean-energy vehicles. Furthermore, in the designated procurement schemes for furniture, printing services, and vehicle maintenance at central budgetary units, the use of low-volatility raw and auxiliary materials is explicitly mandated to reduce air pollution. Moving forward, the Ministry of Finance will accelerate the establishment and improvement of a comprehensive standards system for government procurement requirements for green, low-carbon products, developing category-specific standards for green building and green building-material procurement; vigorously promote the application of prefabricated construction and green building materials to enhance building quality; and strengthen the principal responsibility of procuring entities by clearly stipulating green and low-carbon requirements in government procurement documents and increasing the procurement of green, low-carbon products.

9. Question: How does the Ministry of Finance support research, development, and dissemination of green and low-carbon technologies, as well as related efforts to strengthen foundational capabilities?

Answer: In terms of supporting scientific and technological innovation: First, by providing funding for the implementation of central government science and technology programs (including special projects and funds), support is extended to research activities related to green and low-carbon development. For example, during the 13th Five-Year Plan period, key special projects under the National Key R&D Program—such as “Clean and Efficient Coal Utilization and New Energy-Saving Technologies,” “Renewable Energy and Hydrogen Energy Technologies,” “New Energy Vehicles,” “Green Buildings and Building Industrialization,” and “Nuclear Safety and Advanced Nuclear Energy Technologies”—were supported, thereby enhancing the capacity for scientific and technological innovation that underpins green and low-carbon development. Since 2021, support has also been provided for the deployment of the key special project “Earth System and Global Change (Research and Demonstration of Key Technologies for Peaking Carbon Emissions and Achieving Carbon Neutrality)” under the National Key R&D Program. Second, stable funding is provided to central-level research institutes and national key laboratories in the field of green and low-carbon development, enabling them to improve their research infrastructure and conduct independent research. These institutions are then able to carry out research on green and low-carbon development in accordance with national strategic priorities and the requirements of relevant industry authorities. In terms of supporting basic capacity building: this is primarily achieved through budgetary allocations from relevant departments to strengthen key areas such as environmental quality monitoring, environmental inspection and law enforcement, natural resource management, and natural ecosystem protection. Efforts are also being made to reinforce the establishment of systems for carbon emission statistics, accounting, and regulatory oversight; to conduct pilot projects for carbon monitoring and assessment, as well as carbon emission statistics, accounting, and analysis; and to intensify research on the fundamental theories, basic methodologies, and implementation pathways for achieving carbon peaking and carbon neutrality.

10. Question: What key funding mechanisms does the Ministry of Finance employ to support the consolidation and enhancement of carbon sink capacity, and what have been the outcomes?