Page 99 - Low Carbon Development in China and India
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socio-economic challenges of higher development priority like poverty
alleviation, employment, and equity, besides a sole transformation to a
low carbon society; on the other hand, both governments need a huge
amount of additional financial resources to kick off the development
of low carbon technologies. Therefore, both governments should use
reformed fiscal and financial instruments for promoting low carbon
technologies. Some of these reformed instruments are explained below.
Transfer Payment
Transfer payment can be used as a major fiscal tool for financing low
carbon technologies. The transfer payment with a special purpose fund
will help maximize the dividend of tax revenue transfer payment. Both
governments can redirect the transfer payment of some fiscal revenue
to relevant departments for low carbon technology development by
setting up a special low carbon financing fund or establishing special
nationwide low carbon financing programmes in existing funds (e.g.,
the Clean Development Mechanism [CDM] Fund of China). Besides
fiscal measures, both China and India can also use traditional financial
instruments for low carbon development.
Public Fund Direction Instrument
Based on the experiences related to the national policy funds or special
funds (e.g., the CDM Fund and the Emerging Industries Venture
Initiative of China), China and India can set up special ‘green funds’
as the parent fund dedicated to supporting the development of clean
technology investment enterprises and investing in low carbon private
equity fund, so as to channel more social capital to green and low
carbon sectors. There are a lot of successful cases at home and abroad
in the co-financing of public and private sectors under government
guidance. In addition, China and India should consider reducing the
income tax for grants of private enterprises in low carbon development
sectors, in order to incentivize the private sector’s participation
in granting.
Carbon Financial Instrument
The international carbon market used to play a very positive role in
promoting social funds to support low carbon programmes, but it has
been in the downturn recently under the impact of the international
economic recession and the adjustment of the CDM. The domestic
carbon market is a market-oriented measure and plays a significant
role in raising funds for low carbon development, forming a long-
64 Low Carbon Development in China and India
alleviation, employment, and equity, besides a sole transformation to a
low carbon society; on the other hand, both governments need a huge
amount of additional financial resources to kick off the development
of low carbon technologies. Therefore, both governments should use
reformed fiscal and financial instruments for promoting low carbon
technologies. Some of these reformed instruments are explained below.
Transfer Payment
Transfer payment can be used as a major fiscal tool for financing low
carbon technologies. The transfer payment with a special purpose fund
will help maximize the dividend of tax revenue transfer payment. Both
governments can redirect the transfer payment of some fiscal revenue
to relevant departments for low carbon technology development by
setting up a special low carbon financing fund or establishing special
nationwide low carbon financing programmes in existing funds (e.g.,
the Clean Development Mechanism [CDM] Fund of China). Besides
fiscal measures, both China and India can also use traditional financial
instruments for low carbon development.
Public Fund Direction Instrument
Based on the experiences related to the national policy funds or special
funds (e.g., the CDM Fund and the Emerging Industries Venture
Initiative of China), China and India can set up special ‘green funds’
as the parent fund dedicated to supporting the development of clean
technology investment enterprises and investing in low carbon private
equity fund, so as to channel more social capital to green and low
carbon sectors. There are a lot of successful cases at home and abroad
in the co-financing of public and private sectors under government
guidance. In addition, China and India should consider reducing the
income tax for grants of private enterprises in low carbon development
sectors, in order to incentivize the private sector’s participation
in granting.
Carbon Financial Instrument
The international carbon market used to play a very positive role in
promoting social funds to support low carbon programmes, but it has
been in the downturn recently under the impact of the international
economic recession and the adjustment of the CDM. The domestic
carbon market is a market-oriented measure and plays a significant
role in raising funds for low carbon development, forming a long-
64 Low Carbon Development in China and India
