<p>Do central bank penalties affect energy efficiency? This study conducts a theoretical analysis based on stakeholder engagement theory, uses data from Chinese cities between 2008 and 2020, and employs fixed-effects models to investigate the effect of central bank penalties on energy efficiency and its mechanism. First, this study finds that central bank penalties enhance energy efficiency by reducing information asymmetry, improving payment system efficiency, increasing the capital supply of financial institutions, and strengthening stakeholder engagement. Second, mechanistic studies show that central bank penalties promote climate-friendly technological innovation and industrial digitization, the latter two being conducive to improving energy efficiency. Third, the role of central bank penalties in improving energy efficiency is greater in the municipalities and in high financial efficiency cities. Overall, the findings indicate that the Chinese government can effectively use central bank penalties to improve energy efficiency.</p>