Can decentralized energy transition policy achieve a sustainable green transformation of high-energy-consuming firms? Evidence from China

As an important contributor to pollution and carbon emission reduction, whether high-energy-consuming firms can successfully realize a sustainable green transition is of great concern. Taking the China's New Energy Demonstration Cities (NEDC) pilot policy for instance, we explore whether the decentralized energy transition policy has driven firms' green transformation towards sustainability. Results suggest that NEDC policy can significantly improve high-energy-consuming firms' green transformation and reducing carbon emissions in the pilot cities. This effect is primarily driven by three key mechanisms: investment and financing, green technology innovation, and energy structure optimization. However, further analysis reveals that the green transformation of high-energy-consuming firms under the NEDC policy is not sustainable in the long run, largely due to the risks of greenwashing and just transition challenges during the transformation process. Additionally, we find that increased government and public concern for the environment and the environmental background of corporate top managers create a synergistic effect with the NEDC policy. This study provides an explanation for why high-energy-consuming firms have not achieved a sustainable green transition as expected, and offers new ideas for the design of energy transition policies from a transition risk perspective.