IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v125y2023ics0140988323003614.html
   My bibliography  Save this article

Financial development and the energy net-zero transformation potential

Author

Listed:
  • Ding, Wangwang
  • Du, Juntao
  • Kazancoglu, Yigit
  • Mangla, Sachin Kumar
  • Song, Malin

Abstract

Climate change urgently requires a transition from fossil fuels to clean energy. However, this energy transition demands a dynamic balance between the energy system and the economy and climate, in which adequate financing is a key factor. This study analyzed data from 285 cities in China from 2004 to 2020 empirically to assess the energy net-zero transformation potential (ENTP) and the relationship between financial development (FD) and ENTP. The findings demonstrate that FD can improve urban ENTP, but this depends on the scale of the city, level of economic development, and resource endowment. Moreover, a nonlinear relationship exists between FD and ENTP. After FD reaches a certain level, it needs to shift to green finance, which should not be unilaterally emphasized in underdeveloped financial markets. Finally, FD has a spatial effect on ENTP, and the FD of neighboring regions can improve regional ENTP, which provides the possibility for regional cooperation. The results also provide insights into the financial instruments that can facilitate ENTP implementation.

Suggested Citation

  • Ding, Wangwang & Du, Juntao & Kazancoglu, Yigit & Mangla, Sachin Kumar & Song, Malin, 2023. "Financial development and the energy net-zero transformation potential," Energy Economics, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:eneeco:v:125:y:2023:i:c:s0140988323003614
    DOI: 10.1016/j.eneco.2023.106863
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988323003614
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2023.106863?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Månberger, André & Stenqvist, Björn, 2018. "Global metal flows in the renewable energy transition: Exploring the effects of substitutes, technological mix and development," Energy Policy, Elsevier, vol. 119(C), pages 226-241.
    2. Madaleno, Mara & Dogan, Eyup & Taskin, Dilvin, 2022. "A step forward on sustainability: The nexus of environmental responsibility, green technology, clean energy and green finance," Energy Economics, Elsevier, vol. 109(C).
    3. Xunzhang, Pan & Wenying, Chen & Clarke, Leon E. & Lining, Wang & Guannan, Liu, 2017. "China's energy system transformation towards the 2°C goal: Implications of different effort-sharing principles," Energy Policy, Elsevier, vol. 103(C), pages 116-126.
    4. Lee, Chien-Chiang & Feng, Yi & Peng, Diyun, 2022. "A green path towards sustainable development: The impact of low-carbon city pilot on energy transition," Energy Economics, Elsevier, vol. 115(C).
    5. Song, Yan & Zhang, Ming & Sun, Ruifeng, 2019. "Using a new aggregated indicator to evaluate China's energy security," Energy Policy, Elsevier, vol. 132(C), pages 167-174.
    6. Kander, Astrid & Stern, David I., 2014. "Economic growth and the transition from traditional to modern energy in Sweden," Energy Economics, Elsevier, vol. 46(C), pages 56-65.
    7. Khan, Anwar & Chenggang, Yang & Hussain, Jamal & Kui, Zhou, 2021. "Impact of technological innovation, financial development and foreign direct investment on renewable energy, non-renewable energy and the environment in belt & Road Initiative countries," Renewable Energy, Elsevier, vol. 171(C), pages 479-491.
    8. Shahbaz, Muhammad & Sinha, Avik & Raghutla, Chandrashekar & Vo, Xuan Vinh, 2022. "Decomposing scale and technique effects of financial development and foreign direct investment on renewable energy consumption," Energy, Elsevier, vol. 238(PB).
    9. Zeng, Sheng & Su, Bin & Zhang, Minglong & Gao, Yuan & Liu, Jun & Luo, Song & Tao, Qingmei, 2021. "Analysis and forecast of China's energy consumption structure," Energy Policy, Elsevier, vol. 159(C).
    10. Song, Malin & Zheng, Huanyu & Shen, Zhiyang & Chen, Boyang, 2023. "How financial technology affects energy transformation in China," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    11. Dogan, Eyup & Chishti, Muhammad Zubair & Karimi Alavijeh, Nooshin & Tzeremes, Panayiotis, 2022. "The roles of technology and Kyoto Protocol in energy transition towards COP26 targets: Evidence from the novel GMM-PVAR approach for G-7 countries," Technological Forecasting and Social Change, Elsevier, vol. 181(C).
    12. Uzar, Umut, 2020. "Political economy of renewable energy: Does institutional quality make a difference in renewable energy consumption?," Renewable Energy, Elsevier, vol. 155(C), pages 591-603.
    13. Wang, Ziyi & Wennersten, Ronald & Sun, Qie, 2017. "Outline of principles for building scenarios – Transition toward more sustainable energy systems," Applied Energy, Elsevier, vol. 185(P2), pages 1890-1898.
    14. Xu, Xin & Huang, Shupei & An, Haizhong, 2021. "Identification and causal analysis of the influence channels of financial development on CO2 emissions," Energy Policy, Elsevier, vol. 153(C).
    15. Song, Malin & Du, Juntao & Tan, Kim Hua, 2018. "Impact of fiscal decentralization on green total factor productivity," International Journal of Production Economics, Elsevier, vol. 205(C), pages 359-367.
    16. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki, 2019. "The way to induce private participation in green finance and investment," Finance Research Letters, Elsevier, vol. 31(C), pages 98-103.
    17. Hake, Jürgen-Friedrich & Fischer, Wolfgang & Venghaus, Sandra & Weckenbrock, Christoph, 2015. "The German Energiewende – History and status quo," Energy, Elsevier, vol. 92(P3), pages 532-546.
    18. Assi, Ala Fathi & Zhakanova Isiksal, Aliya & Tursoy, Turgut, 2020. "Highlighting the connection between financial development and consumption of energy in countries with the highest economic freedom," Energy Policy, Elsevier, vol. 147(C).
    19. Du, Kerui & Cheng, Yuanyuan & Yao, Xin, 2021. "Environmental regulation, green technology innovation, and industrial structure upgrading: The road to the green transformation of Chinese cities," Energy Economics, Elsevier, vol. 98(C).
    20. Emodi, Nnaemeka Vincent & Haruna, Emmanuel Umoru & Abdu, Nizam & Aldana Morataya, Sergio David & Dioha, Michael O. & Abraham-Dukuma, Magnus C., 2022. "Urban and rural household energy transition in Sub-Saharan Africa: Does spatial heterogeneity reveal the direction of the transition?," Energy Policy, Elsevier, vol. 168(C).
    21. Zhao, Jun & Dong, Kangyin & Dong, Xiucheng & Shahbaz, Muhammad, 2022. "How renewable energy alleviate energy poverty? A global analysis," Renewable Energy, Elsevier, vol. 186(C), pages 299-311.
    22. Jin, Yi & Gao, Xiaoyan & Wang, Min, 2021. "The financing efficiency of listed energy conservation and environmental protection firms: Evidence and implications for green finance in China," Energy Policy, Elsevier, vol. 153(C).
    23. Polzin, Friedemann & Sanders, Mark, 2020. "How to finance the transition to low-carbon energy in Europe?," Energy Policy, Elsevier, vol. 147(C).
    24. Xu, Li & Tan, Junlan, 2020. "Financial development, industrial structure and natural resource utilization efficiency in China," Resources Policy, Elsevier, vol. 66(C).
    25. Linh Pham, 2019. "Does financial development matter for innovation in renewable energy?," Applied Economics Letters, Taylor & Francis Journals, vol. 26(21), pages 1756-1761, December.
    26. Mukhtarov, Shahriyar & Yüksel, Serhat & Dinçer, Hasan, 2022. "The impact of financial development on renewable energy consumption: Evidence from Turkey," Renewable Energy, Elsevier, vol. 187(C), pages 169-176.
    27. Milchram, Christine & Hillerbrand, Rafaela & van de Kaa, Geerten & Doorn, Neelke & Künneke, Rolf, 2018. "Energy Justice and Smart Grid Systems: Evidence from the Netherlands and the United Kingdom," Applied Energy, Elsevier, vol. 229(C), pages 1244-1259.
    28. Anselin, Luc & Tam Cho, Wendy K., 2002. "Spatial Effects and Ecological Inference," Political Analysis, Cambridge University Press, vol. 10(3), pages 276-297, July.
    29. Wang, Rong & Tan, Junlan, 2021. "Exploring the coupling and forecasting of financial development, technological innovation, and economic growth," Technological Forecasting and Social Change, Elsevier, vol. 163(C).
    30. Gaoke Liao & Dequan Yao & Zhihao Hu, 2020. "The Spatial Effect of the Efficiency of Regional Financial Resource Allocation from the Perspective of Internet Finance: Evidence from Chinese Provinces," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(6), pages 1211-1223, May.
    31. Polzin, Friedemann, 2017. "Mobilizing private finance for low-carbon innovation – A systematic review of barriers and solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 525-535.
    32. Toan Luu Duc Huynh & Thomas Walther & Sebastian Utz, 2022. "Green and Sustainable Finance in the Asia-Pacific Markets: An Introduction to the Special Issue," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(1), pages 1-3, March.
    33. Zhao, Yabo & Liu, Xiaofeng & Wang, Shaojian & Ge, Yuejing, 2019. "Energy relations between China and the countries along the Belt and Road: An analysis of the distribution of energy resources and interdependence relationships," Renewable and Sustainable Energy Reviews, Elsevier, vol. 107(C), pages 133-144.
    34. Bompard, Ettore & Ciocia, Alessandro & Grosso, Daniele & Huang, Tao & Spertino, Filippo & Jafari, Mehdi & Botterud, Audun, 2022. "Assessing the role of fluctuating renewables in energy transition: Methodologies and tools," Applied Energy, Elsevier, vol. 314(C).
    35. Xiaoke Zhu & Xueli Chen & Jinyang Cai & Alvydas Balezentis & Ruifa Hu & Dalia Streimikiene, 2021. "Rural financial development, spatial spillover, and poverty reduction: evidence from China," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 34(1), pages 3421-3439, January.
    36. Usman, Muhammad & Balsalobre-Lorente, Daniel & Jahanger, Atif & Ahmad, Paiman, 2022. "Pollution concern during globalization mode in financially resource-rich countries: Do financial development, natural resources, and renewable energy consumption matter?," Renewable Energy, Elsevier, vol. 183(C), pages 90-102.
    37. Strunz, Sebastian, 2014. "The German energy transition as a regime shift," Ecological Economics, Elsevier, vol. 100(C), pages 150-158.
    38. Zhang, Yong & Liu, Zhen & Baloch, Zulfiqar Ali, 2022. "Combining effects of private participation and green finance for renewable energy: Growth of economy as mediating tool," Renewable Energy, Elsevier, vol. 195(C), pages 1028-1036.
    39. Rahman, Mohammad Mafizur & Alam, Khosrul, 2022. "Impact of industrialization and non-renewable energy on environmental pollution in Australia: Do renewable energy and financial development play a mitigating role?," Renewable Energy, Elsevier, vol. 195(C), pages 203-213.
    40. Liu, Wei & Li, Hong, 2011. "Improving energy consumption structure: A comprehensive assessment of fossil energy subsidies reform in China," Energy Policy, Elsevier, vol. 39(7), pages 4134-4143, July.
    41. Galvin, Ray, 2018. "‘Them and us’: Regional-national power-plays in the German energy transformation: A case study in Lower Franconia," Energy Policy, Elsevier, vol. 113(C), pages 269-277.
    42. Zhang, Yonggang & Dilanchiev, Azer, 2022. "Economic recovery, industrial structure and natural resource utilization efficiency in China: Effect on green economic recovery," Resources Policy, Elsevier, vol. 79(C).
    43. Zheng Guang‐Wen & Muntasir Murshed & Abu Bakkar Siddik & Md Shabbir Alam & Daniel Balsalobre‐Lorente & Haider Mahmood, 2023. "Achieving the objectives of the 2030 sustainable development goals agenda: Causalities between economic growth, environmental sustainability, financial development, and renewable energy consumption," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(2), pages 680-697, April.
    44. Jiang, Bing & Sun, Zhenqing & Liu, Meiqin, 2010. "China's energy development strategy under the low-carbon economy," Energy, Elsevier, vol. 35(11), pages 4257-4264.
    45. Eyraud, Luc & Clements, Benedict & Wane, Abdoul, 2013. "Green investment: Trends and determinants," Energy Policy, Elsevier, vol. 60(C), pages 852-865.
    46. Huang, Shi-Zheng, 2022. "The effect of natural resources and economic factors on energy transition: New evidence from China," Resources Policy, Elsevier, vol. 76(C).
    47. Jiang, Mingrui & Luo, Sumei & Zhou, Guangyou, 2020. "Financial development, OFDI spillovers and upgrading of industrial structure," Technological Forecasting and Social Change, Elsevier, vol. 155(C).
    48. Yang, Lisha & Ni, Mengying, 2022. "Is financial development beneficial to improve the efficiency of green development? Evidence from the “Belt and Road” countries," Energy Economics, Elsevier, vol. 105(C).
    49. Zhu, Shuai & Song, Malin & Lim, Ming Kim & Wang, Jianlin & Zhao, Jiajia, 2020. "The development of energy blockchain and its implications for China's energy sector," Resources Policy, Elsevier, vol. 66(C).
    50. Lioui, Abraham & Sharma, Zenu, 2012. "Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects," Ecological Economics, Elsevier, vol. 78(C), pages 100-111.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Du, Juntao & Shen, Zhiyang & Song, Malin & Vardanyan, Michael, 2023. "The role of green financing in facilitating renewable energy transition in China: Perspectives from energy governance, environmental regulation, and market reforms," Energy Economics, Elsevier, vol. 120(C).
    2. Talan, Amogh & Rao, Amar & Sharma, Gagan Deep & Apostu, Simona-Andreea & Abbas, Shujaat, 2023. "Transition towards clean energy consumption in G7: Can financial sector, ICT and democracy help?," Resources Policy, Elsevier, vol. 82(C).
    3. Shahbaz, Muhammad & Wang, Jianda & Dong, Kangyin & Zhao, Jun, 2022. "The impact of digital economy on energy transition across the globe: The mediating role of government governance," Renewable and Sustainable Energy Reviews, Elsevier, vol. 166(C).
    4. Chishti, Muhammad Zubair & Sinha, Avik & Zaman, Umer & Shahzad, Umer, 2023. "Exploring the dynamic connectedness among energy transition and its drivers: Understanding the moderating role of global geopolitical risk," Energy Economics, Elsevier, vol. 119(C).
    5. Song, Malin & Zheng, Huanyu & Shen, Zhiyang & Chen, Boyang, 2023. "How financial technology affects energy transformation in China," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    6. Lin, Boqiang & Zhou, Yicheng, 2021. "How does vertical fiscal imbalance affect the upgrading of industrial structure? Empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    7. Polzin, Friedemann & Sanders, Mark & Serebriakova, Alexandra, 2021. "Finance in global transition scenarios: Mapping investments by technology into finance needs by source," Energy Economics, Elsevier, vol. 99(C).
    8. Appiah-Otoo, Isaac & Chen, Xudong & Ampah, Jeffrey Dankwa, 2023. "Does financial structure affect renewable energy consumption? Evidence from G20 countries," Energy, Elsevier, vol. 272(C).
    9. Bai, Xiao & Wang, Kuan-Ting & Tran, Trung Kien & Sadiq, Muhammad & Trung, Lam Minh & Khudoykulov, Khurshid, 2022. "Measuring China’s green economic recovery and energy environment sustainability: Econometric analysis of sustainable development goals," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 768-779.
    10. Zhou, Hongji & Xu, Guoyin, 2022. "Research on the impact of green finance on China's regional ecological development based on system GMM model," Resources Policy, Elsevier, vol. 75(C).
    11. Cao, Jianhong & Law, Siong Hook & Samad, Abdul Rahim Abdul & Mohamad, Wan Norhidayah W., 2023. "Internal mechanism analysis of the financial vanishing effect on green growth: Evidence from China," Energy Economics, Elsevier, vol. 120(C).
    12. Chuanjia Du & Chengjun Wang & Tao Feng, 2023. "The Impact of China’s National Sustainable Development Experimental Zone Policy on Energy Transition," Sustainability, MDPI, vol. 15(10), pages 1-21, May.
    13. Appiah, Michael & Ashraf, Sania & Tiwari, Aviral Kumar & Gyamfi, Bright Akwasi & Onifade, Stephen Taiwo, 2023. "Does financialization enhance renewable energy development in Sub-Saharan African countries?," Energy Economics, Elsevier, vol. 125(C).
    14. Fu, Haoliang & Guo, Wenwei & Sun, Zheng & Xia, Ting, 2023. "Asymmetric impact of natural resources rent, monetary and fiscal policies on environmental sustainability in BRICS countries," Resources Policy, Elsevier, vol. 82(C).
    15. Nihal Ahmed & Franklin Ore Areche & Adnan Ahmed Sheikh & Amine Lahiani, 2022. "Green Finance and Green Energy Nexus in ASEAN Countries: A Bootstrap Panel Causality Test," Energies, MDPI, vol. 15(14), pages 1-13, July.
    16. Hossain, Mohammad Razib & Singh, Sanjeet & Sharma, Gagan Deep & Apostu, Simona-Andreea & Bansal, Pooja, 2023. "Overcoming the shock of energy depletion for energy policy? Tracing the missing link between energy depletion, renewable energy development and decarbonization in the USA," Energy Policy, Elsevier, vol. 174(C).
    17. Ran, Qiying & Yang, Xiaodong & Yan, Hongchuan & Xu, Yang & Cao, Jianhong, 2023. "Natural resource consumption and industrial green transformation: Does the digital economy matter?," Resources Policy, Elsevier, vol. 81(C).
    18. Xing Zhao & Yifan Guo & Zhen Liu & Anteng Xiu, 2023. "Boosting green recovery: the impact of green fiscal policy on green total factor productivity," Economic Change and Restructuring, Springer, vol. 56(4), pages 2601-2619, August.
    19. Wang, Kai-Hua & Zhao, Yan-Xin & Jiang, Cui-Feng & Li, Zheng-Zheng, 2022. "Does green finance inspire sustainable development? Evidence from a global perspective," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 412-426.
    20. Zhu, Junpeng & Lin, Boqiang, 2022. "Resource dependence, market-oriented reform, and industrial transformation: Empirical evidence from Chinese cities," Resources Policy, Elsevier, vol. 78(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:125:y:2023:i:c:s0140988323003614. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.