This report reviews the development and situation of new and renewable energy industries in China，as well as the situation of various sub-industries’ technical progress. Based on this the report discusses the key policy issues to support the industries’ development，and put forward that the reason for new and renewable energy industries relying on fiscal subsidies is the externalization of traditional energy’s environmental costs and the technological innovation promoting mechanism. To correct the externalization，the policy can tax the traditional energy，or subsidize the substitution new and renewable energy. As nearly all countries adopt the latter choice，the report also discusses the key area of subsidy and its exit mechanism. Upon the theoretical analyses，the report the biggest disadvantage of new and renewable energy comes from the de facto subsidy to traditional energy which neglecting its environmental impacts，and the lagging of energy market regulation reform. The main policy recommendations include：（a）to increase the cost of traditional energy；（b）to promote the process of energy transition and coal substitution；（c）to formulate bigger market for new and renewable energy through with various means；（d）to setup a sound evaluation system for industrial subsidies；（e）to setup a technological innovation institution mainly relying on firms；（f）to support the R&D of key technologies；（g）to promote the development of unconventional energy，such as shale gas，impact gas and coal bed methane.