How does energy finance promote energy transition? Evidence from Shanghai crude oil futures

Abstract

We examine the energy transition effect of Shanghai crude oil futures (SC). Using Chinese renewable energy firm-level data between 2014q1 and 2021q3, we show that SC can alleviate the inhibitory effect of global oil price fluctuations on energy transition. We further explore three potential underlying mechanisms through which the energy transition effect of SC: reducing the impact of global oil price volatility on firms' business risk, financialized investment, and debt cost. We find the energy transition effect of SC is more pronounced in samples with low-risk resistance. Our paper sheds new light on the real effects of SC on energy transition.