The research team led by Assistant Professor Bin YE from the School of Environmental Science and Engineering at Southern University of Science and Technology (SUSTech) published a research paper titled “Does green finance ensure energy security while achieving low-carbon transformation of listed electricity firms? Evidence from China” in the international academic journal Energy Economics. For the first time, systematically evaluating the synergistic effects of green finance policies between macro-regional energy security and micro-level corporate low-carbon transformation, providing empirical evidence from China to help alleviate the contradictions within the energy “impossible trinity.”

Figure 1. Theoretical Framework of the Impact of Green Finance on Low-Carbon Energy Security Index (LCESI)

The power industry is a critical battlefield for achieving the United Nations Sustainable Development Goals and China’s “dual-carbon” goals. The power system faces a dual challenge: it must reduce emissions through aggressive decarbonization while ensuring the security and stability of energy supply amid increased volatility in renewable energy. Green finance, as a key policy tool for promoting sustainable development, has been widely recognized for its role in reducing carbon emissions. However, whether it can simultaneously promote low-carbon transformation while ensuring energy security lacks a systematic quantitative evaluation in academia.

To address this issue, the research team innovatively constructed the Low-Carbon Energy Security Index (LCESI) based on four dimensions: availability, accessibility, affordability, and environmental sustainability, and proposed an integrated analytical framework linking the macro-regional level with the micro-enterprise level (Figure 1). This framework illustrates how green finance, through financial support and policy incentives, influences corporate governance and decision-making mechanisms at the micro level, and in turn affects the structural characteristics of regional energy systems and their low-carbon energy security performance at the macro level.

Figure 2. Changes in China’s Power Generation Structure by Energy Type from 2011 to 2023

As the world’s largest power system, China’s electricity industry is in a critical period of low-carbon transformation, providing a unique real-world scenario for evaluating policy effectiveness. The research team compiled industry data from 2011 to 2023 (Figure 2), and the results show that although thermal power still dominates, power generation from renewable energy sources such as wind and solar has exhibited significant growth. Alongside the adjustment of the energy structure, preliminary evidence indicates that the development of green finance is closely related to the reduction of pollutants such as sulfur dioxide at the regional level (Figure 3), reflecting that low-carbon transformation has already had a positive environmental impact. However, the rapid increase in the share of renewable energy also places new constraints on the stable operation of the power system and energy supply capacity, highlighting the trade-off between carbon reduction goals and energy security. Against this real-world backdrop, assessing whether green finance promotes low-carbon transformation while also ensuring energy security constitutes the core starting point for the empirical analysis carried out in this study.

Figure 3. Trends in Pollutant Emissions in Green Finance Pilot Areas (2010-2023)

To accurately identify policy effects, the research team used provincial and enterprise panel data, treating the national green finance reform and innovation pilot zones as a “quasi-natural experiment,” and conducted an empirical analysis using the difference-in-differences (DID) model. The study found that the overall regional LCEI in China showed a fluctuating upward trend over the past decade, particularly after the implementation of the green finance pilot policy in 2017, when the index growth became more robust (Figure 4). Further macro-level analysis indicates that, although the average effect of green finance policies nationwide is heterogeneous, in high-energy-consumption regions and areas prone to natural disasters, green finance significantly enhances the marginal effect on energy security. This suggests that in regions with high energy demand pressure or high climate vulnerability, green finance, by supporting the construction of resilient infrastructure, has to some extent strengthened the stability and resilience of the energy system.

Figure 4 Trends of the Regional LCESI and Its Sub-Indicators from 2012 to 2022

At the micro-enterprise level, the study further confirms the emission reduction effects of green finance. Empirical results show that green finance policies significantly reduce the carbon emissions of listed power companies. Through mechanism analysis, researchers found that institutional investor holdings, equity balance, and management shareholding play key moderating roles in policy transmission. State-owned enterprises, companies with high equity concentration, as well as firms with strong innovation capabilities and high digitalization levels, demonstrate stronger green transformation capabilities under policy support.

This study not only enriches the theoretical system in the field of energy economics but also provides important references for policymakers when promoting the low-carbon transformation of the power industry. Green finance strategies should be implemented according to local conditions, especially in climate-vulnerable and high-energy-consumption areas, where the support of financial tools for the resilience of energy systems should be strengthened. Additionally, power companies, in the process of advancing low-carbon transformation, should focus on improving internal governance mechanisms and enhancing technological and management capabilities, thereby making better use of green finance resources.

The first author of this paper is postdoctoral researcher Jin WANG from the School of Environmental Science and Engineering at SUSTech, and the corresponding author is Bin YE. SUSTech is the sole corresponding institution, with collaborators including Senior Researcher Bin SU from the Energy Research Institute of the National University of Singapore.

Paper Link: https://www.sciencedirect.com/science/article/abs/pii/S0140988325009223