IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v202y2025ics0301421525001144.html
   My bibliography  Save this article

Green finance reform under climate policy uncertainty: Implications for energy transition and security

Author

Listed:
  • Gao, Weilong

Abstract

The positive role of green finance reform (GFR) in promoting energy transition (ET) and ensuring energy security (ES) has been widely discussed, but no research has yet thoroughly examined the specific effects of GFR under climate policy uncertainty (CPU). To address this gap, this study employs a dynamic system model and panel data from 333 Chinese cities spanning 2006 to 2021, applying a multi-period difference-in-differences (DID) approach to capture the temporal and spatial variations in how GFR influences ET and ES under CPU. The results demonstrate that GFR significantly promotes low-carbon ET, but its effectiveness is hindered by CPU. Regional disparities are evident, with stronger adverse effects in cities characterized by lower ES, traditional industrial structures, and poorer environmental quality. Additionally, credit constraints and frequent green technology updates amplify the adverse effects of CPU on GFR's effectiveness. While ET provides notable short-term improvements in ES, these benefits diminish over time due to diminishing marginal returns and technological saturation. This study provides a novel perspective on GFR under uncertainty and underscores the necessity of stable climate policies and region-specific strategies to fully leverage the potential of GFR in advancing energy sustainability and mitigating policy-induced uncertainties.

Suggested Citation

  • Gao, Weilong, 2025. "Green finance reform under climate policy uncertainty: Implications for energy transition and security," Energy Policy, Elsevier, vol. 202(C).
    • Handle: RePEc:eee:enepol:v:202:y:2025:i:c:s0301421525001144
    DOI: 10.1016/j.enpol.2025.114607
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421525001144
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2025.114607?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

    for a different version of it.

    References listed on IDEAS

    as
    1. Mazzucato, Mariana & Semieniuk, Gregor, 2018. "Financing renewable energy: Who is financing what and why it matters," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 8-22.
    2. Du, Yanan & Guo, Qunna, 2023. "Green credit policy and green innovation in green industries: Does climate policy uncertainty matter?," Finance Research Letters, Elsevier, vol. 58(PC).
    3. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    4. Wang, Jiangquan & Shahbaz, Muhammad & Song, Malin, 2021. "Evaluating energy economic security and its influencing factors in China," Energy, Elsevier, vol. 229(C).
    5. Sun, Yunpeng & Guan, Weimin & Cao, Yuning & Bao, Qun, 2022. "Role of green finance policy in renewable energy deployment for carbon neutrality: Evidence from China," Renewable Energy, Elsevier, vol. 197(C), pages 643-653.
    6. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 17(Nov), pages 2-20.
    7. Flammer, Caroline, 2021. "Corporate green bonds," Journal of Financial Economics, Elsevier, vol. 142(2), pages 499-516.
    8. Eliana La Ferrara & Alberto Chong & Suzanne Duryea, 2012. "Soap Operas and Fertility: Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 4(4), pages 1-31, October.
    9. Abbas, Jawad & Wang, Lisu & Ben Belgacem, Samira & Pawar, Puja Sunil & Najam, Hina & Abbas, Jaffar, 2023. "Investment in renewable energy and electricity output: Role of green finance, environmental tax, and geopolitical risk: Empirical evidence from China," Energy, Elsevier, vol. 269(C).
    10. Bai, Dongbei & Du, Lizhao & Xu, Yang & Abbas, Shujaat, 2023. "Climate policy uncertainty and corporate green innovation: Evidence from Chinese A-share listed industrial corporations," Energy Economics, Elsevier, vol. 127(PB).
    11. Doğan, Buhari & Shahbaz, Muhammad & Bashir, Muhammad Farhan & Abbas, Shujaat & Ghosh, Sudeshna, 2023. "Formulating energy security strategies for a sustainable environment: Evidence from the newly industrialized economies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 184(C).
    12. Ivan A. Kapitonov, 2021. "Development of low-carbon economy as the base of sustainable improvement of energy security," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(3), pages 3077-3096, March.
    13. Chen Zhao & Feng Feng & Yuee Chen & Xingteng Li, 2021. "Local government competition and regional innovation efficiency: From the perspective of China-style fiscal federalism," Science and Public Policy, Oxford University Press, vol. 48(4), pages 488-489.
    14. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    15. Lee, Chien-Chiang & Wang, Chang-song, 2022. "Financial development, technological innovation and energy security: Evidence from Chinese provincial experience," Energy Economics, Elsevier, vol. 112(C).
    16. Doğan, Buhari & Khalfaoui, Rabeh & Bergougui, Brahim & Ghosh, Sudeshna, 2025. "Unveiling the impact of the digital economy on the interplay of energy transition, environmental transformation, and renewable energy adoption," Research in International Business and Finance, Elsevier, vol. 76(C).
    17. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
    18. Payne, James E. & Truong, Huong Hoang Diep & Chu, Lan Khanh & Doğan, Buhari & Ghosh, Sudeshna, 2023. "The effect of economic complexity and energy security on measures of energy efficiency: Evidence from panel quantile analysis," Energy Policy, Elsevier, vol. 177(C).
    19. Hengfan Lu & Jiachao Peng & Xiangyi Lu, 2022. "Do Factor Market Distortions and Carbon Dioxide Emissions Distort Energy Industry Chain Technical Efficiency? A Heterogeneous Stochastic Frontier Analysis," Energies, MDPI, vol. 15(17), pages 1-22, August.
    20. Lin, Keliang & Ghosh, Sudeshna & Abbas, Shujaat & Shahbaz, Muhammad & Ferraz, Diogo & Doğan, Buhari, 2024. "Heterogenous impact of energy security and environmental regulations on energy transition: Exploring the disparity between high-income and middle-income countries," Renewable Energy, Elsevier, vol. 237(PB).
    21. Zhou, Xiaoxiao & Dai, Mengsi & Ma, Xiaowei & Charles, Vincent & Shahzad, Umer & Zhao, Xin, 2024. "Economic policy uncertainty and the inhibitory effect of firms' green technology innovation," Global Finance Journal, Elsevier, vol. 60(C).
    22. Huo, Jie & Peng, Chen, 2023. "Depletion of natural resources and environmental quality: Prospects of energy use, energy imports, and economic growth hindrances," Resources Policy, Elsevier, vol. 86(PA).
    23. Ma, Yu & Zhang, Tingting & Qian, Wenyu & Wei, Danqi, 2022. "Financial development, demographic changes, and the growth of the non-hydro renewable energy Industry—An empirical test based on R&D and financing costs," Renewable Energy, Elsevier, vol. 185(C), pages 217-229.
    24. Lu, Yuchen & Gao, Yuqiang & Zhang, Yu & Wang, Junrong, 2022. "Can the green finance policy force the green transformation of high-polluting enterprises? A quasi-natural experiment based on “Green Credit Guidelines”," Energy Economics, Elsevier, vol. 114(C).
    25. Li, Houjian & Li, Qingman & Huang, Xinya & Guo, Lili, 2023. "Do green bonds and economic policy uncertainty matter for carbon price? New insights from a TVP-VAR framework," International Review of Financial Analysis, Elsevier, vol. 86(C).
    26. Doğan, Buhari & Chu, Lan Khanh & Khalfaoui, Rabeh & Ghosh, Sudeshna & Shahbaz, Muhammad, 2024. "Strategy towards sustainable energy transition: The effect of policy uncertainty, environmental technology and natural resources rent in the OECD nations," Resources Policy, Elsevier, vol. 98(C).
    27. Inzamam Ul Haq & Supat Chupradit & Chunhui Huo, 2021. "Do Green Bonds Act as a Hedge or a Safe Haven against Economic Policy Uncertainty? Evidence from the USA and China," IJFS, MDPI, vol. 9(3), pages 1-18, August.
    28. Sun, Guanglin & Fang, Jiming & Li, Ting & Ai, Yongfang, 2024. "Effects of climate policy uncertainty on green innovation in Chinese enterprises," International Review of Financial Analysis, Elsevier, vol. 91(C).
    29. Karl V. Lins & Henri Servaes & Ane Tamayo, 2017. "Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis," Journal of Finance, American Finance Association, vol. 72(4), pages 1785-1824, August.
    30. Xiao Yan Zhou & Ben Caldecott & Andreas G. F. Hoepner & Yao Wang, 2022. "Bank green lending and credit risk: an empirical analysis of China's Green Credit Policy," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1623-1640, May.
    31. Ren, Xiaohang & Li, Jingyao & He, Feng & Lucey, Brian, 2023. "Impact of climate policy uncertainty on traditional energy and green markets: Evidence from time-varying granger tests," Renewable and Sustainable Energy Reviews, Elsevier, vol. 173(C).
    32. Hu, Yingde & Bai, Wensong & Farrukh, Muhammad & Koo, Chun Kwong, 2023. "How does environmental policy uncertainty influence corporate green investments?," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    33. Yun Zhang & Xia Fang & Zhenyu Yang & Yuchen Sun & Qiuyu Wang, 2023. "Green Finance, Technological Innovation, and Energy Efficiency Improvements: Evidence from China’s Green Finance Reform Pilot Zone," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(11), pages 3531-3549, September.
    34. Xiaoshuai Fan & Kanglin Chen & Ying-Ju Chen, 2023. "Is Price Commitment a Better Solution to Control Carbon Emissions and Promote Technology Investment?," Management Science, INFORMS, vol. 69(1), pages 325-341, January.
    35. Huseyin Gulen & Mihai Ion, 2016. "Editor's Choice Policy Uncertainty and Corporate Investment," The Review of Financial Studies, Society for Financial Studies, vol. 29(3), pages 523-564.
    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. Yang, Tongbin & Zhou, Bo, 2025. "Does transition finance policies persistently fuel green innovation in brown firms? Investigating the roles of ESG rating and bank connection," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    2. Dong, Xiaotian & Wang, Kai-Hua & Tao, Ran & Sorana, Vătavu & Moldovan, Nicoleta-Claudia, 2024. "Is there a relationship between climate policy uncertainty and green finance? Evidence from bootstrap rolling window test," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 277-289.
    3. Xu, Kunliang & Shao, Yanmin & Hu, Yiwen, 2025. "Responding to perceived environmental policy uncertainty with green technological innovation engagement: Evidence from a text-based measure," Energy Economics, Elsevier, vol. 142(C).
    4. Zhao, Lili & Ma, Yibing & Chen, Na & Wen, Fenghua, 2025. "How does climate policy uncertainty shape corporate investment behavior?," Research in International Business and Finance, Elsevier, vol. 74(C).
    5. Hou, Deshuai & Wang, Qi & Sun, Qiong & Chen, Ying, 2025. "Does short selling affect corporate green transformation? —Evidence from China," Research in International Business and Finance, Elsevier, vol. 76(C).
    6. Chu, Zhongzhu & Zhang, Qiyuan & Tan, Weijie & Chen, Pengyu, 2024. "Assessing the impact of climate policy stringency on corporate energy innovation: Insights from China," Energy Economics, Elsevier, vol. 140(C).
    7. Zixuan Zhang & Zhenyu Ge, 2024. "Fishing in muddy water? Climate policy uncertainty and corporate greenwashing in environmental, social, and governance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(6), pages 4191-4207, September.
    8. Wang, Jianlong & Liu, Yong & Wang, Weilong & Wu, Haitao, 2024. "Does artificial intelligence improve enterprise carbon emission performance? Evidence from an intelligent transformation policy in China," Technology in Society, Elsevier, vol. 79(C).
    9. Zhong, Qian & Zhang, Qun & Yang, Jingjing, 2025. "Can artificial intelligence empower energy enterprises to cope with climate policy uncertainty?," Energy Economics, Elsevier, vol. 141(C).
    10. Cheng, Shulei & Chen, Yongtao & Wang, Kexin & Jia, Lijun, 2024. "Climate policy uncertainty influences carbon emissions in the semiconductor industry," International Journal of Production Economics, Elsevier, vol. 278(C).
    11. Fang, Lei & Yu, Chin-Hsien & Li, Xinghao & Chiang, Jyun-You, 2025. "Embracing uncertain times: An energy security perspective," Energy Economics, Elsevier, vol. 144(C).
    12. Yi Chen & Zhongwen Xu & Xuehao Wang & Yining Yang, 2023. "How does green credit policy improve corporate social responsibility in China? An analysis based on carbon‐intensive listed firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 889-904, March.
    13. Liu, Shimeng & Xiong, Xiong & Gao, Ya, 2025. "Market-based environmental regulations and green innovation: Evidence from the pilot carbon markets in China," Research in International Business and Finance, Elsevier, vol. 77(PA).
    14. Wang, Fengrong & Mbanyele, William & Muchenje, Linda, 2022. "Economic policy uncertainty and stock liquidity: The mitigating effect of information disclosure," Research in International Business and Finance, Elsevier, vol. 59(C).
    15. Angelidis, Timotheos & Michairinas, Athanasios & Sakkas, Athanasios, 2024. "World ESG performance and economic activity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).
    16. Yongkang Lin & Qinghua Song & Lingyun He, 2025. "Can the green finance reform and innovation pilot policy promote green technology innovation?—a novelty evidence from both polluting companies and city commercial banks in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(4), pages 8403-8431, April.
    17. Ling-Yun He & Xiao-Feng Qi, 2021. "Environmental Courts, Environment and Employment: Evidence from China," Sustainability, MDPI, vol. 13(11), pages 1-16, June.
    18. Li, Changsong & Cao, Xiaojing & Wang, Zeyu & Zhang, Jiali & Liu, Huan, 2025. "The impact of green bond issuance on corporate green innovation: A signaling perspective," International Review of Financial Analysis, Elsevier, vol. 102(C).
    19. Jiazhan Gao & Guihong Hua & Baofeng Huo, 2025. "Turning “green” into “gold”: A study on the impact of green finance pilot zone policy on energy carbon emission efficiency," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(1), pages 129-143, February.
    20. Ongsakul, Viput & Papangkorn, Suwongrat & Jiraporn, Pornsit, 2023. "Estimating the effect of climate change exposure on firm value using climate policy uncertainty: A text-based approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:enepol:v:202:y:2025:i:c:s0301421525001144. 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/enpol .

    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.