In the 1980s, Chinese leaders acknowledged that industry was energy inefficient and an obstacle for economic development. Since then, the government has adopted the principle of “equal treatment to development and conservation with immediate emphasis on the latter”, making conservation of strategic importance to energy policy. Measures have been adopted to promote efficient energy use. The national energy law and regulation system consists of two parts: those adopted by NPC and those issued by the State Council and related ministries. Crucial energy laws include the Electricity Law (1995) and the Energy Conservation Law (1998).The Energy Conservation Law aims to strengthen energy conservation, particularly for key energy-using entities, promote rational use of energy and energy conservation technology. This law regulates energy conservation activities and promotes energy-saving. It led to over 164 state energy savings standards which help to reduce carbon emissions. For instance, the new energy efficiency standard for room air conditioners is expected to yield cumulative carbon emission reductions of over 300 million tons by 2020, which is about the size of the European commitment under the Kyoto Protocol.In 2004, the State Council approved the Medium and Long Term Energy Development Plan for 2004-2020, and NDRC launched the first China Medium and Long Term Energy Conservation Plan. In 2005, NPC adopted the Renewable Energy Law, which set out duties of the government, business and others in renewable energy development and utilization. It also included measures relating to mandatory grid connection, price regulation, differentiated pricing, special funds and tax reliefs, and set the goal of 15% of China’s energy from renewable sources by 2020.In February 2005, the Renewable Energy Law (REL) was passed by the National People’s Congress. A number of supporting regulations and guidelines have been put into place to implement the law.Article 4 of the REL requires that a goal for the amount of renewable energy in China’s energy portfolio be established. A series of administrative orders and guidelines, notably the Eleventh Five-Year Plan for Renewable Energy Development (EFYPRED) and the Mid- and Long-Term Plan for Renewable Energy Development (MLTPRED) were published to specify what the goal ought to be.The goal for total RE capacity by 2010 was 300 million tce, of which 248.24 million tce was to come from renewable electricity. Hydroelectricity is counted as RE. In the 2010 and 2020 targets, hydroelectric represents 80% of all renewable capacity. The goal for non-hydro renewables is 1% of grid-connected electricity generation by 2010 and 3% by 2020. Electricity investors whose capacity exceeds 5000 MW shall get 3% from non-hydro renewable sources by 2010 and 8% by 2020 (MLTPRED). The REL set up guaranteed grid access and cross-subsidization to ensure that renewable electricity plants recover their operation costs. Article 14 stipulates that enterprises such as the State Power Grid and the China South Power Grid shall sign agreements, with approved renewable electricity generators, to purchase all their grid-connected electricity. The State Electricity Regulatory Commission’s (SERC) executive order No. 25, Rules for Grid Enterprises to Purchase all Renewable Electricity, 2007, detailed grid responsibility for purchasing all grid-connected renewable electricity.The price at which grid operators purchase renewable electricity is not decided by the market but follows government-guided prices. For wind, the wholesale price is based on bid prices from a government-organized tendering process. For biomass, solar, and other renewable electricity, prices are set by the government based on a rule similar to the “rate of return” principle: that is, cost plus a reasonable return on capital. These prices are much higher than fossil fuel electricity. The purpose of guaranteed grid access at a government-set price is to ensure a market for renewable electricity which is still significantly higher cost than fossil fuel generation.In return for ensuring access for renewable electricity, grid enterprises are allowed to recover the cost above purchasing conventional electricity through cross-subsidization. According to Article 20 of the REL and the “Renewable Electricity Pricing and Financing” published by the National Development and Reform Committee (NDRC) in 2006, grids may recover from customers (1) expenses for getting renewable electricity connected, and (2) the difference between purchasing renewable electricity and purchasing fossil fuel electricity of the same amount.The REL also set up other economic incentives for RE. Article 25 encourages financial institutions to provide preferential loans. Article 26 states that the government shall provide tax benefits to eligible renewable projects. So far, neither SERC nor NDRC has published administrative orders to implement these measures. As a result, they have been used in an ad hoc and limited manner.According to Administrative order No. 2001-198, issued by the Ministry of Finance (MOF) and the State Administration of Taxation in 2001, value-added tax for municipal solid waste for power generation is refunded. The value-added tax for wind power was reduced from 17% to 8.5%. As a result of the REL with feed-in tariffs, China’s installed wind capacity has doubled every year since 2005, and reached number one for “newly added capacity” in 2009.In 2006, the State Council issued the Decision to Strengthen Energy Conservation. In the same year, NDRC set two goals in the 11th Five-Year Plan (2006-2010): to double per capita GDP of the country by 2010 (compared to 2000) and decrease the energy consumed per unit of GDP by 20%, targeting an annual savings rate of 4%. In line with this target, the government raised electricity prices for eight energy-intensive industries.In June 2007, NDRC issued China’s National Climate Change Programme, the country’s first global warming policy initiative. This indicated the need to adopt measures, covering: GHG mitigation; adaptation; climate change science and technology; public awareness on climate change; and institutions and mechanisms.Concerning mitigation, the focus is on energy production and transformation, energy efficiency and conservation, industrial processes, agriculture, forestry and municipal waste. As to energy production and transformation, measures aim to strengthen the existing energy legal system, improve the national energy programme, implement the Renewable Energy Law, promote favourable conditions for renewable energy and GHG mitigation, stimulate energy price reform, optimize the energy mix, promote innovation and efficiency in generating technologies, renewable and non-renewable, including nuclear power. These policies are expected to have a major influence on the energy and utilities sectors. China is voluntarily committed to reducing its carbon intensity per unit of GDP by 40-35% by 2020 compared to the 2005 level. It has also announced plans to reduce its energy intensity levels by 31% from 2010 to 2020 and increase non-fossil fuel energy consumption to 15% of the energy mix in the same time period.From June 2007, different tariffs (5-10%) were imposed on 142 export goods classified as energy intensive and polluting goods, and tax rebates were abolished for 553 so-called ”high energy-consumption, highly polluting, resource based” products. The government has also supported energy conservation projects, and requires financial institutions to back them. However, state-led initiatives to increase energy efficiency have not yet received wide support from local governments and industry.China’s 12th Five-Year Plan (2011-2016) on National Economic and Social Development, targets economic growth, innovation, competitiveness and social developments. Economic growth in the main three sectors, namely the farming, industry and services, is the main objective. Specific emphasis is dedicated to Green development, environmental protection and energy conservation. The Plan includes binding global energy targets, with non-fossil fuel resources reaching 11.4% of primary energy consumption by 2015, energy intensity decreasing by 16% and CO2 emissions per unit of GDP decreasing by 17% by 2015. It also states that the country anticipates to increase the share of natural gas and other cleaner technologies in the country’s energy mix and close several smaller coal-fired plants that were less efficient and heavy pollutants. In January 2012, the government launched a pilot programme in seven provinces and cities to place an absolute cap on carbon emissions, a first for the country, in an effort to kick-start the development of a functioning carbon market in these areas, following unsuccessful “soft cap” programs in the past.In order to further increase the adoption of renewables, China’s 12th Five-Year Plan sets a target for RE sources to reach 9.5% of total energy consumption, and 20% of annual electricity production by 2015. In 2012, the targets were further defined as follows: 100 GW of wind capacity (including 5 GW offshore wind), 35 GW of solar energy14 and 290 GW of hydro power by 2015. In China, the energy development plan, published in January 2013 as part of the 12th Five-Year Plan, sets ambitious renewables targets with mandatory 2015 targets for non-fossil energy use, energy intensity, carbon intensity and particulate emissions.China ratified the UN Framework Convention on Climate Change (UNFCCC) on 5 January 1993 and the Kyoto Protocol on 30 August 2002.In 2012, the government published a new Energy Policy White Paper, aiming to continue the development of energy supply and provision whilst addressing the need to balance growing consumption with sustainability. The white paper sets out a number of key policy goals, in support of the 12th Five-Year Plan. These include expanding international collaboration in energy and promoting technical and scientific development, as well as improving universal energy access and the broadening of institutional reforms in the energy sector. This will include the accelerated development of an improved legal framework for the sector, promoting market-oriented reforms, and improving administration of the sector, including simplifying administrative procedures and reducing direct government intervention, as well as establishing a comprehensive statistics, monitoring and forecasting agency for the sector.Particular prominence was given to the continued development of new and renewable energy sources in the country, with specific policy goals for hydropower, solar, wind and biomass energy, as well as new nuclear development, with an increased focus on safety and sustainability. The white paper also sets out goals for increasing distributed generation in the country, aiming to construct 1,000 new distributed generation systems by 2015.China Renewable Energy Scale up Program (CRESP)The China Renewable Energy Scale up Program (CRESP) has been designed as a strategic partnership between the GoC and the World Bank/GEF. The program includes three GEF supported phases over a period of 15 years. The GEF program is justified by the long-term and complex nature of the policy issues hampering the scale up of renewable energy and the need for a flexible approach to adapt to the fast changing environment and the priorities as they emerge during implementation. The objective of the CRESP program (three phases) is to enable commercial renewable electricity suppliers to provide energy to the electricity market efficiently, cost-effectively and on a large scale. The objective of CRESP Phase II is to support the ambitious renewable energy scale-up program in China with a focus on efficiency improvement and reduction of incremental costs.