How financial technology affects energy transformation in China

Energy transformation is a crucial means of China's commitment response to climate change. However, the renewable energy market has the characteristics of long-term return, high financing constraints, and relies on the support of an effective financial system. Using panel data from 30 provinces in China from 2006 to 2018, this study uses a panel vector autoregressive model to explain the bidirectional causal relationship between inno-vative financial instruments and the development of renewable energy. There are also significant spatial and temporal correlations between them. At the same time, the degree of industrialization, carbon emissions, and population density also have a positive impact on renewable energy. In contrast, GDP per capita and urbani-zation have significant negative impacts on renewable energy. In the end, this study suggests that the govern-ment should actively promote modern financial technologies (e.g. green financing) for developing renewable energy to achieve sustainability goals. Financial institutions should further increase green credit support for the renewable energy industry.

Automated summary

Energy transformation is crucial for China's response to climate change, but the renewable energy market faces challenges such as long-term return and high financing constraints, which require support from an effective financial system. Using panel data from 30 provinces in China, this study explores the causal relationship between innovative financial instruments and renewable energy development, and finds significant spatial and temporal correlations. Additionally, industrialization, carbon emissions, and population density have positive impacts on renewable energy, while GDP per capita and urbanization have significant negative impacts. The study recommends government promotion of modern financial technologies, such as green financing, and increased green credit support from financial institutions for the renewable energy industry.