Promoting low-carbon energy transition through green finance: New evidence from a demand-supply perspective

For China, achieving the “dual carbon” goals depends greatly on transitioning to low-carbon energy. Green finance has been pivotal in accelerating this transition by supporting environmentally sustainable projects. However, its hidden role in promoting energy transition has received little attention. This study examines data from 30 provincial regions in China between 2000 and 2018 to explore this relationship. Our findings reveal that continuous improvements in green finance significantly contribute to a low-carbon energy transition, primarily through enhancing finance efficiency rather than merely increasing scale. This effect is closely related to the size of the energy industry and its allocative efficiency. Furthermore, mechanisms, such as developing energy substitution technology, expanding energy supply capacity, raising environmental awareness, and optimizing economic structures are crucial for promoting low-carbon energy transitions. These results are beneficial for governments implementing targeted policies to promote low-carbon energy transitions by developing green finance.