Exploring the impact of carbon finance policy on photovoltaic market development – An experience from China

Abstract

Solar energy is one of the most promising clean energy photovoltaic markets that will play an important role in countries achieving economic decarbonization. A carbon financial policy is an environmental policy that utilizes financial means to reduce carbon emissions. In addition, few existing studies have used textual analysis to study the impact and mechanism of carbon financial policy on the photovoltaic market development. In order to provide theoretical and empirical support for exploring new paths, modes, and practices of carbon financial policies to promote the development of the photovoltaic market, this paper empirically analyzes the impacts and heterogeneity of carbon financial policy on photovoltaic market development based on authoritative policy perspectives with the data of 30 provinces in China from 2015 to 2021 as the research samples and explores the mechanism of its action. The study results show that carbon financial policy positively affects photovoltaic market development, and the conclusion still holds after the robustness test. Meanwhile, there is significant heterogeneity in the effects of carbon financial policies on photovoltaic market development regarding functional positioning, geographic location, economic development, resource endowment, and environmental regulation. As for the mechanism of action, carbon finance policies can promote photovoltaic market development by alleviating financing constraints, increasing innovation vitality, and promoting digital financial inclusion. The breadth of coverage and depth of use positively affect photovoltaic market development, but the degree of digitization does not have a significant effect.