China's policymakers incentivize EMC industry
By Victor Wang
Shanghai. February 23. INTERFAX-CHINA - China intends to ramp up its energy management contract (EMC) industry in the hopes of promoting energy efficiency and environmental protection. On Feb. 17, the central government announced that it would give tax incentives to EMC firms retroactive to Jan.1, 2011.
According to the announcement, EMC firms will be exempt from both business and value-added taxes and will enjoy an income tax holiday for the first three years after they begin generating revenue. Between the fourth and sixth years, EMC companies will only be accountable for half of their income tax bill.
Zhu Lin, head of the ESCO Committee China Energy Conservation Association's (EMCA) Training Department, told Interfax that this is the first detailed policy in support of the State Council's promotion of the development of China's EMC service sector that was outlined in April 2010.
In April 2010, the National Development and Reform Commission (NDRC), the Ministry of Finance, the General Administration of Taxation and the People's Bank of China announced that the central government would support the development of China's EMC industry over the next few years by providing subsidies and other tax and finance benefits.
The ministries said they would attempt to nurture a number of competitive EMC companies by 2012 and set up a relatively mature EMC service system by 2015.
"China's per-GDP unit energy consumption is still over four to five times higher than in countries like Japan and Germany, leaving much room for improvement and expansion over the next few years," Jiangsu Province-based energy expert Li Lei told Interfax.
Since its emergence in the 1970s, the EMC industry has become increasingly popular in developed countries such as the United States and Canada.
EMC firms help companies improve their daily energy consumption efficiency and are paid a proportion of the energy costs they save clients.
The EMC industry was first introduced into China in 1998 and has been expanding ever since.
According to the National Development and Reform Commission (NDRC), China was home to 502 EMC companies as of the end of 2009. The companies had a total output value of more than RMB 58 billion ($8.81 billion) and had the energy conservation capacity of 13.50 million tons of standard coal that year.
Investment bank Shenyin Wanguo Securities forecast that EMC firms' total business revenue in China would grow to RMB 400 billion ($58.57 billion) annually by 2012.
Century Securities, another domestic investment bank, released a research report on Feb. 17 saying that the new tax incentive policy would materially benefit China's EMC firms by substantially improving their profit margins.
The bank also noted that high-energy consuming companies in industries such as metal smelting, construction materials, petrochemical and thermal power could benefit the most from EMC services.
China Securities added that the architecture industry is another key sector that could significantly improve its energy consumption efficiency by cooperating with EMC firms.
