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<p>The energy transition from fossil fuels to renewable sources is essential for achieving sustainable development. Green finance has emerged as a critical mechanism for mobilizing capital toward clean energy projects, yet its effectiveness remains inconsistent across regions. This study examines how climate risk moderates the relationship between green finance and energy transition in 30 Chinese provinces from 2011 to 2020. Using a dynamic panel threshold model with fixed-effects regression and instrumental variable estimation, we find that green finance significantly reduces energy intensity by 0.0404 units (<i>p</i> &lt; 0.001). However, climate risk acts as a critical threshold variable, diminishing green finance’s effectiveness when the Climate Risk Index exceeds 0.7538. Regional heterogeneity is pronounced: central provinces experience the strongest green finance effects (β = −0.3431***), followed by eastern regions (β = −0.1112***), while western regions show negligible effects (β = 0.0058**). Green credit and green investment emerge as the most impactful components. Socioeconomic conditions substantially influence outcomes: green finance is more effective in high-energy-intensity regions, economically developed areas, and highly urbanized provinces. Control variables reveal that economic development, research and development intensity, and educational attainment independently promote energy transition. Policy implications suggest integrating climate risk mitigation into green finance frameworks, implementing region-specific interventions addressing east-west disparities, and enhancing institutional capacity in disadvantaged areas. The study demonstrates that while green finance serves as a powerful catalyst for energy transition, its success depends critically on climate stability, institutional maturity, and complementary socioeconomic conditions. These findings are vital for policymakers designing inclusive, climate-resilient financial strategies to achieve sustainable energy transitions aligned with China’s carbon neutrality goals by 2060. </p> Graphical Abstract <p></p>

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Climate risk and green finance: a threshold analysis of energy transition in China

  • 期刊论文

  • 发表日期：

    2026年3月14日

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  • Xianya Wu,
  • Jack Evelyn

摘要

The energy transition from fossil fuels to renewable sources is essential for achieving sustainable development. Green finance has emerged as a critical mechanism for mobilizing capital toward clean energy projects, yet its effectiveness remains inconsistent across regions. This study examines how climate risk moderates the relationship between green finance and energy transition in 30 Chinese provinces from 2011 to 2020. Using a dynamic panel threshold model with fixed-effects regression and instrumental variable estimation, we find that green finance significantly reduces energy intensity by 0.0404 units (p < 0.001). However, climate risk acts as a critical threshold variable, diminishing green finance’s effectiveness when the Climate Risk Index exceeds 0.7538. Regional heterogeneity is pronounced: central provinces experience the strongest green finance effects (β = −0.3431***), followed by eastern regions (β = −0.1112***), while western regions show negligible effects (β = 0.0058**). Green credit and green investment emerge as the most impactful components. Socioeconomic conditions substantially influence outcomes: green finance is more effective in high-energy-intensity regions, economically developed areas, and highly urbanized provinces. Control variables reveal that economic development, research and development intensity, and educational attainment independently promote energy transition. Policy implications suggest integrating climate risk mitigation into green finance frameworks, implementing region-specific interventions addressing east-west disparities, and enhancing institutional capacity in disadvantaged areas. The study demonstrates that while green finance serves as a powerful catalyst for energy transition, its success depends critically on climate stability, institutional maturity, and complementary socioeconomic conditions. These findings are vital for policymakers designing inclusive, climate-resilient financial strategies to achieve sustainable energy transitions aligned with China’s carbon neutrality goals by 2060.

Graphical Abstract