Effect of green finance on the green transformation of China's building sector: A system dynamics assessment for targeted financing instruments and policies

Pei Liu, Borong Lin, Hao Zhou, Xin Li and George Papachristos

Energy, 2025, vol. 334, issue C

Abstract: The building sector is a major energy end-use sector globally. Promoting the green transformation of the building sector via green finance instruments (GFIs) is crucial for China to achieve its carbon neutrality goal by 2060. This study develops a system dynamics assessment methodology, simulating the dynamics of various building stocks with different energy efficiencies and quantifying the long-term systemic impact of multiple GFIs on both the new development of green buildings and energy retrofitting of existing buildings. The results show that with the implementation of a combination of GFIs, the amount of energy use reduction in the building sector keeps expanding; while the amount of CO2 reduction will reach its highest level from 2040 to 2045 and it subsequently declines. Within the GFI mix, the results demonstrate the indispensable role of fiscal subsidies and the critical bridging role of green insurance for the green transformation of the building sector. The systemic effect of the GFI mix is 22.3 % greater than the sum of the effects of constituent individual GFIs. Drawing on these findings, more targeted GFIs for different building types are proposed, and differentiated policies to both building developers and financial agencies are suggested.

Keywords: Green finance; Building sector; Energy use; CO2 emissions; System dynamics (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:334:y:2025:i:c:s0360544225034875

DOI: 10.1016/j.energy.2025.137845

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