The effect of new energy demonstration city policy on energy consumption transition: Evidence from China

This paper examines the impact of the New Energy Demonstration City (NEDC) policy, a key initiative promoting renewable energy, on the energy consumption transition (ECT) in China. Using panel data from 275 cities and a difference-in-differences (DID) approach, we find that the NEDC policy significantly accelerates the ECT in pilot cities. Robustness checks, including placebo tests, propensity score-matched DID (PSM-DID), and synthetic DID (SDID), confirm the reliability of our findings. The policy primarily drives ECT through technological innovation, with green finance and social investment playing critical roles in enhancing its effectiveness. Heterogeneity analysis reveals that the policy's impact is more pronounced in regions with stricter environmental regulations, in eastern and central areas, in non-resource-dependent cities, and in first- and second-tier urban centers. These findings provide valuable insights for advancing ECT in other developing countries, offering a model for leveraging policy tools to achieve sustainable energy transitions.