Green finance, green development and decarbonization of the energy consumption structure

Energy plays a crucial role in global economic development, but it also contributes significantly to CO2 emissions. China has proposed a "dual-carbon" goal, and a key aspect to achieving this objective is finding effective ways to promote the decarbonization of the energy consumption structure (DECS). Compared with traditional finance, green finance is pivotal in advancing green and low-carbon development. However, the mechanism through which green finance impacts DECS has not been thoroughly explored. This study employs an enhanced weighted multi-dimensional vector angle method, which is more systematic and scientific, to measure DECS. Then, dynamic panel data from 30 provinces in China spanning the years 2003 to 2020 are used. A double fixed-effects model is applied to investigate the impact of green finance on the DECS and identify potential pathways. Results reveal that green finance significantly enhances DECS, primarily by reinforcing green development. The critical impact pathway involves the promotion of green technology innovation and green industry development. Moreover, the enhancing effect of green finance on the DECS is considerably significant in regions with relatively low government spending on science and technology (S&T), and where the focus is not on the "Atmospheric Ten" policy. The measurement of DECS is innovative, and the conclusions derived from it can offer compelling evidence for various social stakeholders. The government has the opportunity to establish a green financial system, supporting green technological innovation and the development of green industries. This approach can accelerate the DECS and work toward achieving the "double carbon" goal at an earlier date.