China has unveiled new consumption taxes on photovoltaic (PV) cells and various battery products, stepping up regulation on overcapacity in the clean energy manufacturing sector and driving the industry to adopt high-efficiency production technologies.

According to the Ministry of Finance (MOF)’s new policy, PV cells will be levied a 2% consumption tax starting from April 1, 2027, with the tax rate rising to 4% as of April 1, 2028. Meanwhile, a 2% consumption tax will take effect on multiple battery products including lithium-ion batteries and nickel-metal hydride batteries, as well as other energy storage devices in September 2026, followed by a 4% tax rate starting September 2027.

The dual tax policies target the long-standing overcapacity issue in China’s clean energy manufacturing industry. By raising operational costs for manufacturers with thin or negative profit margins, the new taxes are expected to accelerate industrial capacity rationalization. Inefficient production lines and backward capacity will become economically unviable, speeding up the phase-out of outdated facilities and the exit of less competitive market players, while guiding the industry toward high-value, high-efficiency development.

The tax measures form part of China’s broader industrial optimization strategy for the clean energy sector. In early July, Chinese authorities released updated mandatory national standards for the PV industry, which will come into force on January 1, 2027. The new standards tighten energy consumption and efficiency requirements across the entire PV value chain, prioritizing high-efficiency and low-energy-intensity products in manufacturing, procurement and project selection.