Impact of Policies on the Development of Geothermal Industry in China: An Empirical Analysis of Panel Data

ABSTRACT Geothermal energy is a clean, low‐carbon, widely distributed, abundant, safe and high‐quality renewable energy. According to a survey of China's geothermal resources, China's annual recoverable geothermal energy resources are equivalent to 2.6 billion tons of standard coal and thus have great development and utilization potential. Using geothermal energy to realize clean heating is highly important for achieving the goals of peak carbon and carbon neutrality. Financial subsidies and tax incentives support the geothermal industry, increase additional income for geothermal enterprises, encourage enterprises to invest more in scientific and technological research and development of the geothermal industry and expand the scale of reproduction to promote the large‐scale sustainable development of the geothermal industry. However, existing policies have difficulty meeting the larger, more efficient and high‐quality development needs of geothermal energy. This paper selects geothermal industry enterprises listed on domestic stock exchanges from 2004 to 2021 as research samples, and it uses panel data to evaluate the implementation effect of geothermal fiscal and tax policies. This research reveals that direct government subsidies significantly enhance the technological capabilities of these enterprises by fostering patent output and driving technological innovation, positively affecting the sector's advancement. In contrast, both corporate income tax and value‐added tax (VAT) burdens are found to negatively correlate with technological levels and investment intentions, with the corporate income tax exhibiting a stronger inhibitory effect on enterprise growth than VAT. However, subsidy intensity and corporate income tax burdens also have complex impacts on financial metrics such as profit margins, asset‐to‐liability ratios, and asset turnover. Surprisingly, subsidies, while boosting long‐term investment, paradoxically lower profit margins and discourage broader organic asset growth. Conversely, corporate income tax, despite reducing net income, encourages stricter financial discipline and reinvestment in asset growth, potentially enhancing operational efficiency and financial health. Additionally, the interactions between different fiscal measures like subsidies, VAT, and corporate income tax show varied effects on financial outcomes, indicating that strategic financial management can mitigate fiscal burdens and enhance company performance. This study underscores the nuanced role of government fiscal policies in shaping the operational and strategic outcomes of geothermal enterprises.