How financial technology affects energy transformation in China

Energy transformation is a crucial means of China's commitment response to climate change. However, the renewable energy market has the characteristics of long-term return, high financing constraints, and relies on the support of an effective financial system. Using panel data from 30 provinces in China from 2006 to 2018, this study uses a panel vector autoregressive model to explain the bidirectional causal relationship between innovative financial instruments and the development of renewable energy. There are also significant spatial and temporal correlations between them. At the same time, the degree of industrialization, carbon emissions, and population density also have a positive impact on renewable energy. In contrast, GDP per capita and urbanization have significant negative impacts on renewable energy. In the end, this study suggests that the government should actively promote modern financial technologies (e.g. green financing) for developing renewable energy to achieve sustainability goals. Financial institutions should further increase green credit support for the renewable energy industry.