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The economically viable decarbonization path for China's electricity sector in the context of environmental decentralisation: The role of green finance

Author

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  • Liu, Haodong
  • Tang, Xinmeng
  • Xu, Qiuyan

Abstract

Improving the economically viable decarbonization effectiveness in the electricity sector holds significant importance for China's achievement of its “dual carbon” objective and for global climate governance. Prior studies have validated the positive role of green finance (GF) in the development of green electricity, but the relationship between GF and carbon emission efficiency in the power sector (PCEE) remains unclear. Furthermore, as a key institutional factor in regional environmental governance in China, whether environmental decentralisation (ED) moderates this relationship warrants further exploration. Based on panel data of 30 Chinese provincial-level regions from 2010 to 2022, this paper first measures PCEE using the Super-SBM-GML model, and then adopts the benchmark regression model, the intermediary effect model, and the spatial econometric models to investigate the impact of GF on PCEE and the moderating role of ED. The findings are as follows: (1) GF contributes to enhancing PCEE. This promoting effect is more prominent when GF regulation is stricter and the GF quality is higher, as well as in regions dominated by wind and solar power. (2) GF primarily improves PCEE by enhancing management efficiency, promoting technological progress, and optimising power structure. (3) GF has a promoting role on PCEE in surrounding areas through spatial spillovers. (4) The influence of GF on PCEE is subject to the nonlinear constraint with a single threshold. When GF exceeds the threshold, its beneficial effect on local PCEE intensifies, while its spillover effect on neighbouring regions diminishes. (5) While ED positively moderates the relationship between GF and local PCEE, it also weakens the positive spillover effect of GF on PCEE in surrounding areas. This study provides a scientific reference for policy makers to revise GF policy and energy policy.

Suggested Citation

  • Liu, Haodong & Tang, Xinmeng & Xu, Qiuyan, 2025. "The economically viable decarbonization path for China's electricity sector in the context of environmental decentralisation: The role of green finance," Energy Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:eneeco:v:152:y:2025:i:c:s0140988325008680
    DOI: 10.1016/j.eneco.2025.109038
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