Don’t Be Left in the Dark! Environmental Protection Enterprises Enjoy These Preferential Policies

Starting April 1, VAT rates were officially reduced. At the State Council’s Executive Meeting held on March 20, it was explicitly announced that, from January 1, 2019, through the end of 2021, third-party enterprises engaged in pollution prevention and control would be subject to a preferential corporate income tax rate of 15%. This measure brings substantial benefits to environmental protection enterprises. Implementing tax incentives for the environmental protection industry aligns with China’s green development strategy and its principles of tax preference. But precisely which tax incentives does the environmental protection industry enjoy—and how can enterprises make optimal use of them? Previously, the Environmental PPP Center of the Chinese Academy of Environmental Planning (CAEP) conducted a questionnaire survey and on-site interviews with 73 environmental protection enterprises to assess the implementation status of these tax incentives. The survey results indicate that, overall, enterprises express satisfaction with the various tax incentives; however, numerous issues remain—some common across China’s broader tax system, others unique to the environmental protection sector. Based on these findings, the research team proposed targeted policy recommendations. Tax Incentives for Environmental Protection Technologies and Equipment These primarily cover VAT and corporate income tax. VAT exemptions apply to revenues generated from R&D and technical service activities; corporate income tax is exempted on technology transfer revenue up to RMB 5 million. China’s environmental protection industry comprises three main segments: environmental protection technologies and equipment (products), environmental services, and comprehensive resource utilization. Under China’s current tax system, environmental enterprises enjoy various tax incentives—including VAT exemption, immediate VAT refund upon collection, tax credits, tax reductions and exemptions, additional deductions for R&D expenses, income reduction, accelerated depreciation, and preferential low tax rates. Specific VAT incentives for environmental protection technologies and equipment include: exemption of VAT on revenues derived from R&D and technical service activities; exemption of VAT and import duties on certain major imported equipment and key components or raw materials used for exhaust gas and wastewater treatment, sludge processing, etc. This category covers 17 types of large-scale environmental protection and resource-comprehensive-utilization equipment—including flue gas denitrification systems, wet electrostatic precipitators (for air pollution control), wastewater treatment equipment, and resource-comprehensive-utilization equipment. Input VAT incurred by enterprises when purchasing or self-manufacturing fixed assets may be offset against output VAT upon submission of valid supporting documentation. Regarding corporate income tax, income from technology transfers up to RMB 5 million is exempt from corporate income tax. Enterprises investing in specialized environmental protection, energy-saving, water-conservation, or workplace safety equipment listed in the "Enterprise Income Tax Preferential Catalogue for Specialized Equipment for Energy Conservation, Water Conservation, and Environmental Protection (2017 Edition)" (covering six categories—water pollution control, air pollution control, soil pollution control, solid waste disposal, specialized environmental monitoring instruments and meters, and noise and vibration control—with a total of 24 items) or in the "Enterprise Income Tax Preferential Catalogue for Specialized Workplace Safety Equipment" may claim tax credit equal to a specified percentage of their investment amount. Technology-based small- and medium-sized enterprises may claim additional deductions for R&D expenditures incurred in developing new technologies, products, or processes. Fixed assets subject to rapid product obsolescence—or those operating continuously under severe vibration or high corrosion—may qualify for shortened depreciation periods or accelerated depreciation. Pursuant to the Ministry of Finance and State Taxation Administration’s “Notice on Enterprise Income Tax Policies Concerning Deduction of Equipment and Instruments” (Cai Shui [2018] No. 54), certain equipment and instrument investments are eligible for enhanced accelerated depreciation policies.

CCUS Gains Momentum! Green Plains Posts Profit in Q4 2025 After Turning Around Prior-Year Loss

U.S. biofuel producer Green Plains recently released its financial results for the fourth quarter of 2025, reporting a net profit of USD 11.9 million—reversing a net loss of USD 54.9 million in the same period last year. The company projects that revenue from carbon credits and related policy incentives will reach at least USD 188 million in 2026. The improved performance stems primarily from the company’s strategic investments in carbon capture, utilization, and storage (CCUS) and low-carbon fuel production. CEO Chris Osowski stated during the earnings call on February 5 that the company’s “carbon monetization strategy” has begun generating cash flow. In this quarter alone, Green Plains recognized USD 27.7 million worth of Section 45Z tax credit carbon credits and has already received the first installment of related payments. Currently, carbon capture facilities at Green Plains’ three ethanol plants—in York, Central City, and Wood River, Nebraska—are fully operational. These facilities capture over 90% of the CO₂ emissions generated by the plants and transport the captured CO₂ to Wyoming for permanent geological sequestration.

Green Plains Achieves Q1 Profitability Driven by $55.2M Tax Credit

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Green Plains Renewable Energy posted a $32.9 million net income in Q1 2026, reversing prior losses thanks to a $55.2 million tax credit. Adjusted EBITDA rose to $71.5 million as the company raised its full-year guidance.

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