How feed-in-tariff subsidies affect renewable energy investments in China? New evidence from firm-level data

The feed-in-tariff (FiT) policy is a commonly applied policy instrument aimed at fostering renewable energy (RE) investments, yet its actual incentive effect remains controversial, and there is a dearth of micro-level evidence. This study utilizes data from 39 Chinese RE generation companies from 2014 to 2021 to investigate the effect of FiT subsidies on RE investments at the corporate level. Our outcomes are as follows: (1) FiT subsidies exert a significantly positive influence on the investments of RE firms, wherein cash flow, corporate profitability and financing constraints serve as intermediating factors. (2) The economic policy uncertainty (EPU) tends to diminish the positive impact of FiT subsidies on RE investments. Conversely, environmental regulation (ER) levels can enhance the FiT subsidies' positive effect. (3) The stimulating effect of FiT subsidies on investments in large state-owned RE firms exhibits a greater magnitude. Based on this, we put forward targeted policy recommendations. [Display omitted] •Manually collecting firm-level feed-in-tariff (FiT) subsidy data.•One unit of FiT subsidy can increase renewable energy investments by 3.4 units.•The positive effect is more pronounced in large state-owned renewable energy firms.•Cash flow, profitability, and financing constraints serve as intermediating factors.