Digital finance and the low-carbon energy transition (LCET) from the perspective of capital-biased technical progress

Abstract

Digital finance is a new driving force for the low-carbon energy transition (LCET). Using panel data on 283 cities in China, we analyze the impact of digital finance on LCET and decompose LCET into low-carbon energy efficiency transition and low-carbon energy structural transition. Digital finance improves carbon total factor productivity and the proportion of clean energy consumption in total energy consumption, which has a significant positive effect on LCET. This positive effect is attributed to the environmental benefits of capital-biased technical progress. Technological progress strengthens the scale effects and price effects of capital and replaces production factors such as energy, especially nonclean energy, thus promoting energy utilization efficiency and clean energy development. Currently, digital finance is more conducive to promoting the low-carbon energy efficiency transition compared with the low-carbon energy structure transition. Strengthening financial supervision and narrowing the digital usage divide optimizes capital supply and generates financial demands so that digital finance can support LCET. Improving the environmental preference of local governments can enhance the positive effect of digital finance on LCET. Digital finance support for LCET is mainly at the stage of broadening the coverage, with a relatively limited effect of deep cultivation. The application depth of digital finance in the field of energy transition should be further strengthened. This study provides a theoretical reference for the means to achieve effective cohesion between capital demand and financial resource supply in the energy transition stage and provides new enlightenment for the realization of the goals of carbon peaking and carbon neutrality.