Nexus between Green Finance and Renewable Energy Development in China

Renewable energy development is essential to energy structure transition and environmental emission reduction, and promoting renewable energy development via green financial instruments has been an effective approach to attain the objective of carbon neutrality in China. This research explores the bi-directional cointegration relationship between green finance and renewable energy development by adopting provincial data of China from 2005 to 2018. Results indicate a long-run bi-directional comovement exist between green finance and renewable energy development. This cointegration relationship appears in the eastern and central provinces of China, but is absent for western provinces. The pooled mean group estimators show that green finance cannot promote renewable energy development in the short run, whereas it does so in the long run for both the eastern and central provinces. Our research presents implications for emerging economies to initiate and design green financial instruments and renewable energy measures.