Combining green finance and digital finance to promote urban energy efficiency through innovation and policy regulation

Enhancing urban energy efficiency is critical for China's sustainable energy transition, yet the combined role of emerging financial mechanisms in driving efficiency improvements remains underexplored. While digital finance and green finance have been studied independently in the energy literature, their potential complementary interaction and the institutional conditions under which it operates have not been empirically examined. This study employs two-way fixed-effects panel estimation, mediation and moderation analyses, and instrumental-variable identification, using data from 279 Chinese prefecture-level cities over 2011–2021. The results reveal that the complementary interaction between digital finance and green finance significantly improves energy efficiency (interaction coefficient = 1.737, p < 0.01), with green technology innovation mediating approximately 58% and digital technology innovation mediating approximately 46% of the total effect. Climate policy uncertainty and market-based environmental regulations positively moderate this complementary effect, while significant heterogeneity emerges across geographic regions, development periods, resource endowments, and pilot policy contexts, with the effect concentrated in Eastern cities and the post-2017 institutional maturation period. These findings demonstrate that integrated financial ecosystem strategies coordinating digital infrastructure development with green finance deployment and supported by market-based environmental regulations are more effective than isolated financial instruments for promoting urban energy efficiency.