Does green financing benefit the development of renewable energy capacities and environmental quality? Evidence from Chinese provinces

Diby Francois Kassi and Yao Li

Renewable Energy, 2025, vol. 242, issue C

Abstract: Green finance has gained popularity as a promising mechanism for transitioning to a low-carbon economy. Thus, this paper investigates whether green financing increases renewables and enhances environmental quality from 1992Q1 to 2020Q4 in China. We primarily used the method of moments-quantile regression with fixed-effect models. First, we found nonlinear U-shaped impacts of green finance on wind power capacities in all regions, thermal power capacities in the Western and Central areas, and hydropower capacities in Eastern China, respectively. Second, we confirmed an inverted U-shaped impact of green finance on CO2 emissions in the Eastern region but U-shaped effects in the Western and Central regions. Green finance improved environmental quality when certain thresholds were met. Third, green finance had substantial marginal impacts on environmental quality in the least polluted provinces in Western China and the most polluted provinces in Eastern China. Fourth, we demonstrated that higher education, advanced industrial structure, and technological innovations were viable channels to enhance the inhibiting effects of green finance on emissions. Also, stricter environmental regulations and corruption control mostly improve the beneficial effects of green finance on the environment. Finally, there were heterogeneous effects of oil prices, urbanization, foreign direct investments, and trade openness across Chinese provinces.

Keywords: Green finance; Renewable energy; Carbon emissions; Chinese provinces; Moments-quantile regression (search for similar items in EconPapers)
JEL-codes: C50 G20 G30 Q20 Q43 Q50 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:242:y:2025:i:c:s0960148125001442

DOI: 10.1016/j.renene.2025.122482

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