Promoting green investment for renewable energy sources in China: Case study from autoregressive distributed Lagged in error correction approach

Abstract

Green finance development is critical for balancing economic growth and environmental conservation. Global economies implement rigorous environmental rules to limit climate change, stimulating the shift to renewable energy by promoting green investment due to more excellent perception and mounting demands from concerned parties—using 27,042 observations from China's Shanghai and Shenzhen stock exchanges for A-share listed businesses. On data from 1990 to 2019, this research uses a cross-section augmented autoregressive distributed lag (ARDL) framework. The findings show that enforcing strict environmental standards is one of the most effective strategies for Chinese companies to reduce carbon emissions using green financing. Furthermore, renewable energy has a negative correlation with carbon emissions. Our research reveals that renewable energy regulations increase energy businesses' total factor productivity and that the impact of policy implementation lasts for some time. Our results hold up to a variety of green finance promotion approaches. According to further research, the boosting effect of renewable energy policy implementation may be eclipsed by its impact on the allocation of resources efficiency and technical innovation. Furthermore, the influence of renewable energy legislation on total factor productivity varies due to changes in company type, external environment, and geographical position. Renewable energy initiatives, for example, tend to reduce total factor productivity in state-owned businesses, large-scale businesses, and businesses with a high ownership concentration.