<p>When China implemented the exports tax rebate policy through administrative framework in 1985, industrial energy consumption increased by more than five times. The purpose of this study is to examine the relationship between industrial energy demand (IED), exports tax rebate, exports, and the value of industrial output in the presence of other variables such as GDP, taking into account the effects of carbon dioxide (CO₂) and foreign direct investment (FDI). The present study adopted the Autoregressive-Distributed Lag (ARDL) model and Granger Casuality analysis of the VECM to examine the short run and long relationship among different variables. The empirical evidence supported the long-term cointegration of these pasrameters and demonstrated a positive impact on industrial energy consumption. Foreign direct investment reduces the need for industrial power. The conservation hypothesis between export tax credits and industrial energy use was also verified by the Granger Causality analysis of the VECM. Furthermore, export tax credits have a secondary impact on energy use in manufacturing. This research might lead to more effective legal or adminsitarive regulations and policy measures to curb China’s rising energy use in the industrial sector.</p>