Research on Legal System of China Renewable Energy Development Fund

Wu Yu，Bian Yongmin

（1.School of Law University of International Business and Economics，Beijing 100027；2.School of Politics Southwest Jiaotong University，Chengdu Sichuan 610031）

Ⅰ.The legal system of Renewable Energy Development Fund in China

Firstly，the Renewable Energy Development Fund consists of the special fund for the development of renewable energy and additional revenue of power tariff of renewable energy with different applicable targets.The special fund and the additional revenue of power tariff both subsidize the wind，solar，biomass，geothermal and ocean power generation，but the former can also be used in subsidizing exploitation of hydropower.So，Renewable Energy Development Fund should be classified clearly，which obviously goes against the unified fund yet.

Secondly，from the perspective of fund collection，the special fund is financial allocation essentially and mainly used by means of free subsidy and subsidized loan while the additional revenue of power tariff，levied on power consumers，is a kind of cost sharing.It is levied by power grid enterprises on behalf of the Treasury monthly and directly paid to the central treasury in full.The central finance pays power grid enterprises levying commission charge.

Thirdly，from the perspective of application range，two funds can’t be mixed.The special fund can be used in subsidizing the development of renewable energy，such as the construction of independent system of power generated with renewable energy，the construction of information system，demonstration engineering and localized production of equipment.But the additional revenue of power tariff offsets the difference in price of grid-connected power between renewable energy and conventional energy，the part of expenses for the operation and maintenance of independent system of power generated with renewable energy in excess of local provincial average retail tariff and costs of grid-connection.

Fourthly，from the perspective of management pattern，the Treasury sets up the special fund and NDRC and Energy Administration reviews the declaration of exploitation and utilization of renewable energy while the price administration department under the State Council and the State Electricity Regulatory Commission（SERC）jointly manage the additional revenue of power tariff.In the institutional restructure of the State Council in 2013，SERC is incorporated into Energy Administration，and Energy Administration and price administration department under the State Council are both affiliated with NDRC.Therefore，China adopts government management pattern without establishing a management commission of the Renewable Energy Development Fund.Each department stresses on different functions，which results in the lack of uniformity of the management of two funds inside the Fund.A management commission authorized by three departments will avoid overlapping power and help with the declaration，allocation，review，announcement，collection and supervision.

Fifthly，the special fund differs from the additional revenue of power tariff in rights and obligations of legal subjects.The former only involves fund administrators and applicants while the latter involves the subjects of economic management and economic activity.The subject of economic management is the fund administrator and that of economic activity is power generation enterprises with renewable energy and common power grid enterprises.The additional revenue of power tariff is collected from power consumers and released to power generation enterprises by the Treasury.There is a contractual relationship of selling and purchasing electricity between power generation enterprises and power grid enterprises.The power grid enterprises should purchase all ongrid power generated with renewable energy in their coverage.If the additional power price levied by provincial power grid enterprises can’t afford the subsidy for power generated with renewable energy，provincial power grid enterprises will acquire renewable portfolio and sell them to other enterprises that have more additional power tariff than subsidies.However，Interim Procedures for the Administration of the Collection and Use of Renewable Energy Development Fund says nothing about RPC.That is to say，Renewable Energy Development Fund doesn’t have the control of RPC.PRC becomes the fund administrator’s right rather than economic activity subject’s right of market transaction，which results in the loss of essential vitality of RPC.

Ⅱ.The nature of Renewable Energy Development Fund

The Renewable Energy Development Fund is a governmental fund according to the List of National Governmental Fund Projects in 2012.The Interim Procedures for the Administration of Governmental Fund gives it a legal definition.The Notice on Strengthening the Administration of Government Nontax Revenue stipulates explicitly that the governmental fund is nontax revenue together with administrative undertaking charges，fees from fines and confiscations，etc.

The governmental fund is the financial fund differing from investment fund and social fund.According to Interim Procedures for the Administration of Governmental Fund，the governmental fund is always the financial revenue fund，not the financial expenditure fund specially established by public finance budget.But Renewable Energy Development Fund consists of both financial expenditure fund and revenue fund due to the different sources of funds.The special fund is financial expenditure fund while the additional revenue of power tariff is financial revenue fund.Due to different applicants and application rages，the special fund is the state financial subsidy in fact and the additional revenue of power tariff conforms to the definition of governmental fund.

The Renewable Energy Development Fund is established to stimulate the exploitation of renewable energy and promote the power generation with wind energy，solar energy and biomass energy.Because of the high cost of research and development and power generation with renewable energy，the fund aims to reduce the huge cost at the beginning of renewable energy development.It has advantages of policy adjustability，earmark，and flexibility of procedure.

Ⅲ.The comparison of the legal system of the Renewable Energy Development Fund in China and other countries

Compared with Australia’s Renewable Energy Investment Fund，China’s Fund is a governmental commonweal fund，not an investment fund.Compared with Britain’s Carbon Fund，China’s Fund comes from nontax.Compared with America’s Public Benefits Fund（PBF），China’s Fund isn’t a trust fund.Compared with systems of other countries，the system of Renewable Energy Development Fund in China lacks market regulation.

Australia’s Renewable Energy Investment Fund invests based on the return on the investment（ROI）and shares benefits with the federal government，similar to common investment fund.Obviously，Australia’s Renewable Energy Investment Fund links up with the company’s profit.However，Renewable Energy Development Fund in China is more like a policy motivating force.

Britain’s Carbon Fund stipulates that all power generators should pay tax from their selling of power，which is called Climatic Variation Tax.It is closely connected with tradable green certificates of renewable energy and guarantee green certificate trading.The government not only acquires the resource of Carbon Fund from Climatic Variation Tax，but also promotes financing function of green certificate.

America’s PBF，collected by means of System Benefits Charge（SBC）by the state governments，mainly provides power consumers with low-income subsides，consumer education and so on.The differences are that China levies additional power tariff on power consumers who purchase renewable energy，while Britain levies tax on clients who don’t purchase green power and America levies generally.America’s PBF not only improves the development of renewable energy but also expands capacity of green power through a series of incentive policies.

Ⅳ.The defects and suggestions for the system of Renewable Energy Development Fund

The Renewable Energy Development Fund has system defects.On the one hand，the Fund has no control of RPC but the funds of RPC.On the other hand，the management pattern of the fund remains at the fumbling stage and the economic rights of the subjects of economic management and economic activity remains push-and-pull.

1.The lack of market mechanism for RPC

Firstly，renewable energy lacks gradual goals for portfolio.China will gradually raise the percentage of renewable energy in energy mix.The percentage from2010 to 2020increases by 5 percent，far less than that in other countries.Increasing goals means a lot for RPC for the renewable energy.The overall goal for portfolio can only be achieved by clarifying the annual index for undertakers responsible to portfolio.

Moreover，market regulation is not achieved inside RPC.The system only stresses on the stable resources of funds and neglects the portfolio of green power and market regulation.The three are the basic elements of the formulation of RPC.

RPC needs an important supporting system，Tradable Green Certificates.Renewable portfolio standard can be traded in specified market and power grid enterprises without portfolio standard can sign long-term stable contracts with power generation enterprises with renewable energy，which helps solve the reliance on state financial subsidies of power generation enterprises with renewable energy.However，RPC is still a government-control trading scheme.

2.Indistinct rights，obligations and interests between fund administrators and operators

From the vertical legal relations，the system shows the imbalance of administrative measures and market regulation and discordance between enforceability and flexibility of supervisory measures.

Firstly，the system has no ruling function when the four documents are parallel and independent.Interim Procedures for the Administration of the Collection and Use of the Renewable Energy Development Fund mutually supports with other three documents.But it itself only stresses on the collection of the special fund and additional power tariff and the allocation，supervision and announcement all depend on other documents.The system appears large and empty.

Secondly，rights and obligations for legal subjects of Renewable Energy Development Fund are indistinct.As the fund administrator，government departments should execute the macro-control and market regulation that respectively aims at macro economic interests and micro market competition interests.So the system needs an administrator to govern the market of power generated with renewable energy among power grid enterprises and power generation enterprises.In fact，the renewable portfolio can be freely allocated through market and the administrator is the supervisor of the market.

As operators，power grid enterprises and power generation enterprises should be equal in legal status.But the biggest problem lies in the selling of power generated with renewable energy.In order to promote the development of renewable energy，rights and obligations for power grid enterprises and power generation enterprises，power generation enterprises must sell a certain percentage of power generated with renewable energy and power grid enterprises must purchase all power generated with renewable energy，which is Feed-in Tariff Program.But it must be supported by corresponding system to guarantee the grid-connection of entire power.Power grid enterprises always take coal power and hydropower as the resources of power generation and power generated with renewable energy usually costs more than coal power and hydropower.In case of inadequate subsidies，there is no motivation for power grid enterprises to fulfill legal obligations.Firstly，administrators should formulate a more effective subsidy scheme for the collection and allocation of fund.Till now，the government always defaults additional subsidies due to the discordance of macro control and market regulation.Secondly，power grid enterprises will indulge their obligations without strong restraints for them.The lack of supervision on power grid enterprises perhaps results in the imbalance of rights and obligations of power grid enterprises and power generation enterprises.Thirdly，the profit chasing of operators should be taken into account.The Renewable Energy Development Fund will become a lever of value to lever the market competiveness.Tradable Green Certificates should be included in the adjustment of the system to guarantee free trading of renewable portfolio，promote the market financing and guarantee the purchasing of power generated renewable energy by power grid enterprises.

Ⅴ.Conclusion

The system of Renewable Energy Development Fund is a new legal system and should be improved in system principle and specific rules.From the perspective of the design target of the system，it should cooperate with the Feedin Tariff Program and RPC，which reflects the macro-control methods.Besides，it needs market regulation，Tradable Green Certificate to play the role of the governmental fund.

From the perspective of specific rules，the annual increasing goal of renewable portfolio needs implementing to promote active purchase of power generated with renewable energy.Then，a more comprehensive document should be issued.Thirdly，a management commission should be authorized by government for the unified allocation and supervision on the application and use of fund.Fourthly，the rights，obligations and interests of administrators and operators should be clarified.Set forth a liability clause for administrators，for example，what responsibilities they should bear when defaulting the additional subsidies for power grid enterprises.Set forth a clear right and obligation system for operators，such as the responsibilities when power generation enterprises fail in achieving the annual goal for renewable portfolio and punitive responsibilities when power grid enterprises fail in purchasing the entire quantity of power generated with renewable energy.The fine should be included in the fund.

（Translated by Dai Jiabao）

Notes：

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