Does green finance ensure energy security while achieving low-carbon transformation of listed electricity firms? Evidence from China

The power sector is central to achieving the climate goals of the United Nations Sustainable Development Agenda, as it faces the dual challenge of advancing a low-carbon transition while ensuring energy security. This paper examines the critical role of green finance in addressing energy security and achieving low-carbon transformation in China's electricity market. Using a novel regional low-carbon energy security index, we empirically investigate the impact of green finance pilot policies at both regional and firm levels from 2010 to 2023. The results indicate an increase in low-carbon energy security and a decline in carbon emissions from electricity firms over the sample period. At the regional level, green finance policies demonstrate significant effectiveness in high-energy-consumption areas and regions prone to natural disasters. However, the overall impact of the green finance pilot policies on low-carbon energy security is not statistically significant. At the firm level, green finance policies are associated with a statistically significant reduction in firms' estimated carbon emissions, particularly those arising from fossil fuel combustion and solid waste incineration. This effect is especially pronounced in state-owned firms with high ownership concentration, advanced innovation capacity, and strong digitization. Mechanism analysis from a corporate finance perspective suggests that institutional investor ownership, equity balance, and management ownership serve as moderating factors. In summary, this study provides valuable insights into the strategic role of green finance in balancing energy security with the imperative of low-carbon development in China's power sector.