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Sustainable finance and clean energy: Strategies for achieving sustainable development in China

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  • Li, Ting
  • Cheng, weijin

Abstract

China's rapid economic expansion has intensified carbon emissions and heightened climate risks, yet evidence on how green finance, clean energy, low-carbon technology imports, and institutional quality jointly mitigate provincial CO2 emissions remains fragmented. Addressing this gap, this study examines whether sustainable finance and its complementary enablers measurably reduce emissions across Chinese provinces. Using annual provincial data for 2000–2020, the analysis employs second-generation panel diagnostics, including cross-sectional dependence and slope heterogeneity tests, along with CIPS unit-root and Westerlund cointegration approaches to establish long-run relationships among CO2, GDP, green finance (GFM), clean energy use (UCE), low-carbon technology imports (LCTIM), and institutional quality (INS). The study estimates heterogeneous effects using the Method of Moments Quantile Correlation (MMQC) across the 25th–90th CO2 quantiles and verifies robustness through bootstrap quantile regression (BS-QREG), Augmented Mean Group (AMG), Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Dumitrescu–Hurlin panel causality tests. The results reveal a stable long-run cointegrating relationship among all variables; GDP exerts a consistently positive effect on CO2 emissions, with elasticities rising at higher quantiles; UCE, LCTIM, GFM, and INS each significantly reduce emissions, with clean energy's mitigation effect strengthening toward higher quantiles; green finance achieves the largest average abatement elasticities (−1.38 % to −1.66 % per 1 % increase), though marginal impacts weaken in high-emission provinces; and robustness checks confirm the direction and significance of all relationships, while bidirectional causality exists between CO2 and each determinant. The findings suggest that expanding and better targeting green finance instruments, strengthening institutional quality, and accelerating low-carbon technology imports and clean energy deployment are essential to achieving durable, province-level emission reductions across China.

Suggested Citation

  • Li, Ting & Cheng, weijin, 2026. "Sustainable finance and clean energy: Strategies for achieving sustainable development in China," Renewable Energy, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:renene:v:257:y:2026:i:c:s0960148125023572
    DOI: 10.1016/j.renene.2025.124693
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