Abstract: The key to the promotion of renewable energy substituting for fossil energy lies in the price mechanism. The price mechanism for renewable energy can adopt such three ways as renewable energy subsidies, fossil energy tax, and the combination of energy tax and renewable energy subsidies. Through comparison between and analysis of the substitution effect and income effect of different renewable energy price mechanisms, considering the practical problems encountered during the implementing of China’s renewable energy subsidies policy and the national conditions of energy-saving and emission reduction, it is suggested to balance the tax with the subsidy, to turn the present subsidy-oriented supporting policy into the policy of “attaching equal importance to taxes and subsidies”, and further into the tax-oriented policy around 2030, so as to establish a long-acting mechanism for the development of renewable energy.

Key words: renewable energy; price mechanism; fiscal policy; tax policy