IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v34y2026i2p2456-2475.html

From Policy Uncertainty to Carbon Neutrality: Digital Pathways to Renewable Energy and Decarbonization for Achieving SDG 7 and SDG 13

Author

Listed:
  • Wei Li
  • Harley Allen

Abstract

This paper examines and explores corporate digital innovation as an achiever of low‐carbon technological strategies and decarbonization under conditions of climate policy uncertainty (CPU) to promote the United Nations Sustainable Development Goals (SDG 7: Affordable and Clean Energy, and SDG 13: Climate Action). Based on panel data of firms listed in China (2008–2022), with fixed‐effects as well as two‐stage least squares estimations, the analysis results suggest that CPU is a consistent, positive factor increase of corporate carbon emission, which can be seen as the inertial impact of strategic decisions of firms operating in the situation of uncertainty. Nonetheless, those enterprises that have stronger digital innovation capabilities show a softened emission reaction, because their technological responsiveness allows them to make adjustable investments in low‐carbon innovations. The paper also reveals that there is a nonlinear threshold of municipal‐level digital governance, and moderate levels of the e‐government capacity will be linked with the most successful elimination of the adverse impact of CPU, and both underdeveloped and excessively dense digital systems create decreasing returns to regulation. More importantly, the results also point out that punitive environmental policies like penalties on emissions prove to be considerably effective when compared to the incentives‐oriented policies in guiding firms to low‐carbon operational restructuring under unpredictable policy provisions. The key point about this regulatory asymmetry is that balancing credible enforcement in volatile policy settings is the relevance of such systems. Through these observations, it has been highlighted that corporate digital transformation needs to be in consonance with sound and properly tuned regulatory frameworks. The combination of firm‐level technology initiatives and institutional capacity building found in the study provides some practical directions to policy‐makers and business executives to overcome the unpredictability and speed up the process of carbon neutrality achievement without affecting financial results.

Suggested Citation

  • Wei Li & Harley Allen, 2026. "From Policy Uncertainty to Carbon Neutrality: Digital Pathways to Renewable Energy and Decarbonization for Achieving SDG 7 and SDG 13," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(2), pages 2456-2475, April.
    • Handle: RePEc:wly:sustdv:v:34:y:2026:i:2:p:2456-2475
    DOI: 10.1002/sd.70444
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.70444
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.70444?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
    ---><---

    References listed on IDEAS

    as
    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    2. Liu, Yulin & Chen, Lin & Cao, Zhiling & Wen, Fenghua, 2024. "Uncertainty breeds opportunities: Assessing climate policy uncertainty and its impact on corporate innovation," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    3. Mohammed Benlemlih & Çiğdem Vural Yavaş, 2024. "Economic Policy Uncertainty and Climate Change: Evidence from CO2 Emission," Journal of Business Ethics, Springer, vol. 191(3), pages 415-441, May.
    4. Fisher-Vanden, Karen & Ho, Mun S., 2007. "How do market reforms affect China's responsiveness to environmental policy?," Journal of Development Economics, Elsevier, vol. 82(1), pages 200-233, January.
    5. Anh Hoang & Dat Thanh Nguyen & Phuong Uyen Le, 2024. "Economic policy uncertainty and corporate social responsibility: evidence from emerging countries," Cogent Business & Management, Taylor & Francis Journals, vol. 11(1), pages 2375625-237, December.
    6. Roughgarden, Tim & Schneider, Stephen H., 1999. "Climate change policy: quantifying uncertainties for damages and optimal carbon taxes," Energy Policy, Elsevier, vol. 27(7), pages 415-429, July.
    7. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    8. 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).
    9. Yu, Jian & Shi, Xunpeng & Guo, Dongmei & Yang, Longjian, 2021. "Economic policy uncertainty (EPU) and firm carbon emissions: Evidence using a China provincial EPU index," Energy Economics, Elsevier, vol. 94(C).
    10. Cui, Xiaona & Mohd Said, Ridzwana & Abdul Rahim, Norhuda & Ni, Mengjiao, 2024. "Can green finance Lead to green investment? Evidence from heavily polluting industries," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    11. Daniel Shoag & Stan Veuger, 2018. "Shops and the City: Evidence on Local Externalities and Local Government Policy from Big-Box Bankruptcies," The Review of Economics and Statistics, MIT Press, vol. 100(3), pages 440-453, July.
    12. Wang, Nianling & Yin, Jiyuan & Li, Yong, 2024. "Economic policy uncertainty and stock market volatility in China: Evidence from SV-MIDAS-t model," International Review of Financial Analysis, Elsevier, vol. 92(C).
    13. Liu, Yun & Gao, Qun, 2024. "Economic policy uncertainty and enterprise innovation in China: From the perspective of equity financing and financing structure," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 17-33.
    14. M. Bedendo & G. Nocera & L. Siming, 2022. "Greening the Financial Sector: Evidence from Bank Green Bonds," Post-Print hal-04318899, HAL.
    15. Dang, Dandan & Fang, Hongsheng & He, Minyuan, 2019. "Economic policy uncertainty, tax quotas and corporate tax burden: Evidence from China," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    16. Hamang, Jonas, 2024. "Economic development and known natural resource endowment: Discovery rate differentials of oil," Journal of Development Economics, Elsevier, vol. 170(C).
    17. Han Gao & Minming Lan & Jie Li & Tianhang Zhou, 2024. "Economic policy uncertainty and local government debt: Evidence from China," Kyklos, Wiley Blackwell, vol. 77(4), pages 1103-1141, November.
    18. Qianlong Ma & Bokun Hei & Guangchen Li, 2024. "Does economic policy uncertainty shorten the loan term structure? Evidence from China," Economic Change and Restructuring, Springer, vol. 57(4), pages 1-25, August.
    19. Chuanzhen Li & Liang Zhao & Yiwen Zhang, 2024. "Economic policy uncertainty and cash dividend policy: evidence from China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    20. Gao, Han & Chen, Wenbin & Li, Jie & Zhou, Tianhang, 2024. "Economic policy uncertainty and foreign direct investment: Evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 178-191.
    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. Yan, Ying & Lin, Tao & Ma, Heng, 2025. "The impact of corporate climate risk on carbon intensity: Evidence from China," Energy, Elsevier, vol. 334(C).
    2. Haseeb, Mohammad & Usman, Muhammad & Fan, Fei, 2025. "Understanding financial stability through the lens of geopolitical risk in China: The influence of policy uncertainty on climate change," Finance Research Letters, Elsevier, vol. 85(PB).
    3. Jingduan Li & Xuhui Peng & Jie Gao & Qingliang Tang, 2025. "Detecting Greenwashing Behaviour in Decarbonization Performance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(4), pages 3739-3762, December.
    4. Liu, Yulin & Chen, Lin & Cao, Zhiling & Wen, Fenghua, 2024. "Uncertainty breeds opportunities: Assessing climate policy uncertainty and its impact on corporate innovation," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    5. Nicholas Bloom & John Van Reenen & Heidi Williams, 2019. "A Toolkit of Policies to Promote Innovation," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 163-184, Summer.
    6. Huang, Robert & Kahn, Matthew E., 2024. "An economic analysis of United States public transit carbon emissions dynamics," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    7. 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).
    8. Nesta, Lionel & Vona, Francesco & Nicolli, Francesco, 2014. "Environmental policies, competition and innovation in renewable energy," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 396-411.
    9. Aïd, René & Bahlali, Mohamed & Creti, Anna, 2023. "Green innovation downturn: The role of imperfect competition," Energy Economics, Elsevier, vol. 123(C).
    10. René Aïd & Mohamed Bahlali & Anna Creti, 2023. "Green innovation downturn: the role of imperfect competition," Post-Print hal-04317679, HAL.
    11. Mo Chen & Xuhua Hu & Jijian Zhang & Zhe Xu & Guang Yang & Zenan Sun, 2023. "Are Firms More Willing to Seek Green Technology Innovation in the Context of Economic Policy Uncertainty? —Evidence from China," Sustainability, MDPI, vol. 15(19), pages 1-24, September.
    12. Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc J. Melitz, 2024. "The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports," The Review of Economics and Statistics, MIT Press, vol. 106(3), pages 608-626, May.
    13. Anna Kovalchuk, 2025. "Experimental Insights on Investment Strategies for Sustainable Growth Amid China’s Economic Uncertainty," SAGE Open, , vol. 15(2), pages 21582440251, May.
    14. Minyu Zheng & Normaziah Mohd Nor & Zariyawati Mohd Ashhari, 2025. "Exacerbate or alleviate? Impact of economic policy uncertainty on excess cash holdings," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-15, December.
    15. Romagnoli, Matteo, 2024. "Clean sweep: Electricity liberalization and the direction of technological change in the electricity sector," Research Policy, Elsevier, vol. 53(8).
    16. Rik Rozendaal, 2025. "Market Power, Innovation, and the Green Transition," CESifo Working Paper Series 11938, CESifo.
    17. Lan, Sushan & Meng, Wanshan, 2024. "Impact of economic policy uncertainty on systemic risk of real enterprises: Evidence from China," Finance Research Letters, Elsevier, vol. 69(PB).
    18. Xu, Shulin & Chen, Shuoqi & Jiao, Wenniu & Chen, Mengjie, 2025. "State-owned enterprises shareholders and innovation of private enterprises: Evidence from China," Technovation, Elsevier, vol. 140(C).
    19. Tang, Shiyu & Cao, Xiaofang, 2025. "How economic uncertainty affect enterprises' strategic orientation," International Review of Economics & Finance, Elsevier, vol. 101(C).
    20. Shi, Xiangyu & Wang, Chang, 2025. "Carbon emission trading and green transition in China: The perspective of input-output networks, firm dynamics, and heterogeneity," International Journal of Industrial Organization, Elsevier, vol. 100(C).

    More about this item

    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:wly:sustdv:v:34:y:2026:i:2:p:2456-2475. 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: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

    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.