How to achieve clean energy transition through developing green finance? Evidence from China

Abstract

This study examines the relationship between green finance (GF) and clean energy transition (CET) using panel data from 30 Chinese provincial regions from 2003 to 2019. Unlike extant research that relied on single metrics, we develop a comprehensive multidimensional evaluation framework for CET. The findings reveal that GF is a significant but conditional driver of CET and its impact is shaped by multiple contextual factors: Regionally, GF exerts a stronger effect in coastal and low energy consumption areas than that in inland and high energy consumption regions. Furthermore, environmental regulations and energy endowments moderate this relationship, as command-and-control, and voluntary or information-based regulations amplify GF's contribution. Conversely, market-oriented regulation has a weak dampening effect, while excessive energy endowment reliance undermines GF by crowding out green investment. GF's scale (SFIN) and efficiency (EFIN) exhibit distinct dynamics—SFIN significantly drives CET via expanded green capital availability, whereas EFIN shows nonsignificant effects in most cases. Moreover, marketization levels differentiate their roles: Both SFIN and EFIN contribute to CET in high marketization provincial regions. However, only SFIN functions in low marketization regions, where EFIN is constrained by administrative interference and weak institutions. Thus, context-specific policies are needed to leverage GF's potential in advancing CET.