The role of green financing in facilitating renewable energy transition in China: Perspectives from energy governance, environmental regulation, and market reforms

Green financing plays an important role in providing adequate support for environmentally sustainable projects aimed at reducing China's reliance on fossil fuels. At the same time, targeted government policies can facilitate green financial development, helping promote renewable energy transition. We add to the debate on the link between green finance and clean energy consumption as well as explore the exact transmission mechanisms underlying this nexus. Our empirical illustration is based on a generalized method of moments (GMM) specifi-cation of a panel threshold regression model and a sample of 30 Chinese provinces from 2001 to 2019. We find that green financing initiatives have helped accelerate the transformation of China's energy industry by pro-moting an increase in the share of renewable energy in its overall fuel mix, especially in regions with relatively well-functioning markets. Several robustness tests confirm the existence of this relationship. Moreover, our re-sults suggest that improved energy efficiency governance and environmental regulation positively moderate the impact of green finance on clean energy transition. Our study provides policymakers with insights on how improved governance, environmental protection initiatives, and market reforms can foster the development of China's green financial market and help reduce its current dependence on dirty energy.

Automated summary

Green financing plays a crucial role in supporting environmentally sustainable projects and promoting renewable energy transition in China. Through empirical analysis based on a panel threshold regression model, we find that green financing initiatives have facilitated the transformation of China's energy industry, particularly in regions with well-functioning markets. Our results also demonstrate that improved energy efficiency governance and environmental regulation positively moderate the impact of green finance on clean energy transition. This study provides valuable insights for policymakers on fostering the development of China's green financial market and reducing its dependence on dirty energy.