Incentive or constraint? Comprehensive impacts of green credit policy on industrial energy intensity

Green credit policy (GCP) has dual attributes of being both an "environmental regulation" and a "financial instrument". Understanding its role in facilitating industrial green transformation is crucial. However, there is limited theoretical and empirical evidence on the impact of GCP on industrial green transformation. This research fills this gap by comprehensively investigating the impacts and mechanisms of GCP on industrial energy intensity (EI) in China, considering both incentive and constraint effects. Theoretically, the environmental and financial impacts of GCP are merged into a unified analytical framework based on a heterogeneous enterprise model. Empirically, diverse empirical methods, including difference-in-differences (DID), difference-in-differences-in-differences (DDD), and mediating effects models, are adopted to examine whether GCP can promote green innovation or accelerate financial constraints. Results show that (1) GCP significantly decreases EI, especially among high-polluting enterprises (HPEs). The impact of incentives is far greater than that of constraints. (2) Regarding the incentive effect, energy substitution and innovation offsets exert a primary influence on reducing EI. (3) The constraint effect is caused primarily by rising financing and pollution abatement costs. (4) Heterogeneity analysis shows that the inhibiting effect of GCP is more significant in non-state-owned enterprises, underdeveloped financial markets, and abundant energy endowments. This paper provides a theoretical framework and new empirical evidence for policymakers to design effective policies for promoting industrial green transformation.