Energy Strategy Reviews 50 (2023) 101201

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Energy Strategy Reviews

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Is green finance fostering high-quality energy development in China? A

spatial spillover perspective☆
Jiajun Xu a, b, Jinchao Wang a, b, Rui Li b, *, Muxin Gu a, b
a
Center for Economic Development Research, Wuhan University, Wuhan, 430072, China
b
School of Economics and Management, Wuhan University, Wuhan, 430072, China

A R T I C L E I N F O A B S T R A C T

Handling Editor: Mark Howells As the world’s largest energy consumer, it is worth exploring how China can achieve high-quality energy
development. This paper aims to assess the role of green finance development in China’s high-quality energy
Keywords: development (HED). We develop two indicator systems to measure the level of provincial green finance and HED
Green finance in China and find a significant contribution of green finance to both local and neighboring HED based on a spatial
High-quality energy development
model. These findings still hold after considering endogeneity and performing a series of robustness tests. In
Spatial model
addition, we find that the effect of green finance is more pronounced after exceeding the threshold value, and the
Spatial threshold
Spatial attenuation boundary spatial spillover boundary of green finance is 1750 km. These findings provide a reference for the government to
develop further green finance policies to achieve high-quality energy development.

1. Introduction protection [8]. It focuses on investments in renewable energy and clean

Energy development is a major contributor to economic growth and
modern life [1,2]. China is the world’s largest producer and consumer of
energy and the country with the fastest improving energy use efficiency,
which has significantly facilitated its urbanization and industrialization
[3]. However, the massive use of traditional energy sources such as coal,
oil, and natural gas adversely affects air quality and public health [4,5].
In the face of climate change, environmental risk challenges, energy
resource constraints, and other increasingly severe global issues, China
has proposed a strategy for high-quality energy development (HED). The
White Paper on China’s Energy Development in a New Era released by
the Chinese State Council defines HED as an energy development
strategy that reflects the new development concepts of innovation, co­
ordination, green, openness, and sharing. China claims to join other
countries in seeking a new path to accelerate sustainable global energy
development while promoting clean and low-carbon development of its
own energy sources. Therefore, exploring ways to improve HED has
become the focal point of China’s energy strategy at this stage.
At the same time, China is committed to developing green finance to
reduce the environmental and social risks associated with climate
change [6,7]. Green finance is a form of financial services that supports
sustainable economic growth, social inclusion, and environmental
technologies, as well as the sustainable management of resources and
the provision of financial services to combat climate change. At present,
China has made significant progress in the development of green
finance. By the end of 2021, China’s green loan balance was 15.9 trillion
yuan, up 33% year-on-year, ranking first in the world in terms of stock
size. These green credit funds are mainly invested in carbon emission
reduction projects, contributing significantly to China’s carbon peaking
and carbon neutral goals.
Studies have shown that green finance affects many aspects of energy
development. One of the main goals of green finance is to create
attractive investment opportunities that allow businesses and organi­
zations to increase their sustainable energy investments and reduce their
reliance on fossil fuels. Green finance works by using financial in­
struments to reduce risk and promote growth in green sectors, such as
renewable energy and energy efficiency [9–11]. This provides a low-risk
and low-cost way to invest in these sectors and encourages companies to
invest more heavily in these areas. It can also provide financial support
for energy projects to promote energy technologies and improve energy
efficiency [12]. In addition, green finance can help ensure energy access
for those lacking it. For instance, renewable energy financing can
empower people in developing countries to use clean energy technolo­
gies [13].

☆
This work is supported by Major Program of National Social Science Foundation of China (Grant No. 21ZDA004).
* Corresponding author.
E-mail addresses: jiajunxu@whu.edu.cn (J. Xu), jcwang@whu.edu.cn (J. Wang), ruilee@whu.edu.cn (R. Li), 1141891686@qq.com (M. Gu).

https://doi.org/10.1016/j.esr.2023.101201
Received 12 May 2023; Received in revised form 24 August 2023; Accepted 13 September 2023
Available online 20 September 2023
2211-467X/© 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-
nc-nd/4.0/).
J. Xu et al.
Although the literature has investigated the multifaceted effects of
green finance on energy development, HED is a new energy develop­
ment strategy that includes multidimensional goals such as innovation,
coordination, green, openness, and sharing, and the effect of green
finance on HED and its mechanisms is not yet clear. In addition, previous
literature has mainly focused on the direct impact of green finance on
energy development, lacking the examination of its spatial spillover
effects. However, the energy sector has cross-regional characteristics,
and the production, transit, and energy consumption involve multiple
regions’ interconnection. Moreover, the capital, technology, and expe­
rience provided by green finance policies can also cross geographical
boundaries and influence the development of neighboring regions.
Therefore, it is insufficient to focus only on the impact of green finance
on energy development in a region; understanding the spatial spillover
effects of green finance on energy development in neighboring regions
can provide a more comprehensive assessment of the effects of green
finance. By studying the extent and manner of green finance’s impact on
HED in different regions, the differences and complementarities in HED
among regions can be identified, which can help governments and
related institutions to formulate more targeted policies and measures to
promote the maximum contribution of green finance to HED.
Based on the above motivations, this paper aims to investigate the
impact of green finance on HED in a comprehensive manner. First, we
establish the theoretical mechanism of green finance’s impact on HED
regarding both direct and spatial spillover effects. Second, we develop
indicator systems to measure the level of green finance and HED in each
of the 30 Chinese provinces. Then, we investigate the impact of green
finance on HED based on a spatial Durbin model and adopt a series of
robustness tests. Finally, the threshold effect of green finance on HED
and the spatial spillover boundary is examined.
This paper provides the following extensions to the existing litera­
ture. First, we establish the indicator systems for measuring the level of
green finance development and HED considering multiple dimensions,
which can reflect the impact of green finance on energy development
more comprehensively and accurately. Second, we reveal the direct and
spatial spillover effects of green finance on HED from both theoretical
and empirical dimensions, providing researchers with a more compre­
hensive perspective and research paradigm. Then, the test of the spatial
threshold effect finds that the role of green finance would increase at a
high level, which provides new evidence for the phased characteristics
of green finance development and fills the gap in green finance theory.
Finally, the exploration of the spatial decay boundary finds that the
impact of green finance is at a maximum of 1750 km, which provides an
important reference for the government to develop more targeted green
finance policies to promote HED.
This paper is organized as follows. Section 2 presents the literature
review and theoretical mechanisms. Section 3 describes the methodol­
ogy, including the model, variables, and data. Section 4 presents the
empirical results. Section 5 further discusses spatial thresholds and
spatial attenuation boundaries. Section 6 concludes and makes policy
recommendations.
2. Literature review and theoretical mechanisms
2.1. Literature review
Our work is related to two streams of literature: the first is green
finance, which includes the impact of green finance on energy devel­
opment; the second is high-quality energy development.
2.1.1. Green finance
Green finance is a new phenomenon that combines financial and
economic development with environmental protection, emphasizing
“green” and “finance” [14]. As an essential policy for China’s green
transformation and high-quality development, green finance is receiving
more and more attention. The existing literature generally measures the
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Energy Strategy Reviews 50 (2023) 101201
level of green finance development by establishing evaluation index
systems. For example [15], established a system of indicators to measure
the development level of green finance in four dimensions: green credit,
green securities, green insurance, and green investment. In addition,
some literature draws on the establishment of green finance pilot zones
to differentiate the intensity of green finance between regions [16,17].
Based on the above measurement methods of green finance, scholars
have researched the role of green finance in different fields. Since green
finance aims to support environmentally beneficial projects and busi­
nesses, research has focused on exploring the impact of green finance on
environmental pollution and carbon emissions [18]. investigated the
effect of green finance on industrial gas emissions within China. The
results found that the development of green finance helps reduce sulfur
dioxide emissions and positively impacts investment in environmental
protection [19]. applied the spatial Durbin model to find that green
finance promotes local environmental quality but harms surrounding
provinces [20]. found that green finance can promote local green
innovation and green space, but has counterproductive effects on
neighboring cities [21]. found that green finance is an important
channel for green growth to reduce CO2 emissions [22]. found that green
finance promotes high-quality economic development [23]. used a
spatial econometric model to find that green finance promotes
high-quality economic development and has spatial spillover effects.
In addition, the impact of green finance on energy development has
been explored in the literature [24]. demonstrated that the development
of green finance could effectively reduce coal consumption and thus
contribute to sustainable energy development in China [25]. argued that
the green finance policy positively promotes renewable energy devel­
opment and has contributed significantly to the green transformation of
China’s energy structure [26]. found that the effect of green finance on
regional energy intensity showed an inverted U-shaped effect of pro­
motion followed by inhibition [27]. showed that financial sustainability
improves energy efficiency.
2.1.2. High-quality energy development
Energy is an important pillar of economic development, but at the
same time, traditional energy consumption brings carbon emissions and
environmental pollution. In the context of global warming and envi­
ronmental pollution, improving energy development quality has
become a key concern for scholars [28,29]. However, studies have been
conducted with a different focus on the quality of energy development
[30]. developed an energy efficiency index to measure the relationship
between energy consumption and the population’s quality of life, thus
reflecting the quality of energy development. Some scholars have also
considered energy technology and innovation as the key to driving the
energy transition [31,32]. [33] regarded the provision of sufficient,
stable, high-quality energy for the population with no threat to the
environment as the purpose of energy development; otherwise, it is
energy poverty. Further [34], believed that energy development also
needed to ensure residents had equal access to energy. In addition, there
is also literature assessing the quality of energy development in terms of
green energy [35,36], energy structure [37], and energy security [5,38,
39].
The above literature considers the quality of energy development
from different perspectives. However, to comprehensively measure the
quality of energy development, it is necessary to integrate energy
development with the economy, society, and environment in a system.
In recent years, some literature has constructed index systems to mea­
sure the level of HED. For example [40], established a system of in­
dicators to measure the level of HED in each province of China based on
five dimensions of high-quality development [41]. constructed an in­
dicator system to measure HED from three dimensions: green produc­
tion, green consumption, and ecological and environmental protection.
However, most of the literature focuses on the conceptual definition
and measurement of HED but lacks exploring its influencing factors.
Green finance provides financing for renewable energy development,
J. Xu et al.
energy technologies, and environmentally friendly projects. Therefore,
green finance may contribute to the enhancement of HED. In addition,
the spatial spillover effects of green finance have been widely confirmed
in the literature [8,15]. Therefore, it is interesting to apply spatial
models to investigate the impact of green finance on HED.
2.2. Theoretical mechanisms
Green finance not only impacts the local HED but also generates
spatial spillover effects on neighboring regions’ HED. In the following,
we analyze the influence mechanism of green finance on HED in terms of
direct effect and spatial spillover effect, respectively, as shown in Fig. 1.
2.2.1. The direct effect of green finance on HED
Green finance includes specific policies on green credit, green se­
curities, green insurance, green investment, carbon finance, etc. By
providing financial support, reducing financing costs, promoting tech­
nological innovation, strengthening risk management, and regulating
market behavior, the policy portfolio of green finance guides the flow of
funds to the green and sustainable energy sector [24]. This promotes the
transformation and upgrading of the energy industry, reduces pollution
emissions, increases energy efficiency, and improves the equity and
reliability of energy supply, thereby promoting HED. Specifically, the
direct effects of green finance on HED can be divided into five aspects.
(1) Promoting energy technology innovation: By providing invest­
ment and financing support, green finance directs capital to en­
ergy innovation projects, such as new energy technology R&D,
energy storage, and smart grids [42]. At the same time, by
providing green insurance products for energy innovation pro­
jects, green finance reduces the risk of uncertainty for investors
and project developers. This encourages investors and developers
to actively participate in high-risk energy innovation projects and
increase the intensity of R&D investments, driving the adoption
of green technologies and practices [43].
(2) Improving energy structure coordination: By providing financial
support to clean energy projects and energy efficiency improve­
ment projects, green finance reduces the proportion of traditional
energy consumption and increases the proportion of clean en­
ergy, which promotes the optimization of energy structure and
the reduction of energy intensity [44]. This helps to promote
collaborative energy development and improve the overall effi­
ciency and reliability of the energy system [45].
Fig. 1. The impact mechanism of green finance on HED.
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Energy Strategy Reviews 50 (2023) 101201
(3) Promoting green energy development: Green finance encourages
investors to invest capital in energy projects that meet environ­
mentally friendly standards, and provides financial support and
loan concessions for pollution control inputs and environmental
expenditures in the energy industry. This helps to improve the
environmental quality of the energy development process, reduce
the amount of waste and emissions, and promote the green
development of energy [46].
(4) Increasing energy openness: Green finance supports increasing
the share of clean energy exports and reducing dependence on
traditional energy sources. This will help improve the interna­
tional competitiveness of the energy sector and promote the flow
and sharing of domestic and foreign capital, the introduction and
export of new energy technologies, and the cross-country ex­
change of green energy development experiences, thus promot­
ing increased energy openness [43].
(5) Facilitating energy sharing: Green finance improves the reli­
ability of energy supply and coverage through investments in
renewable energy projects, energy infrastructure, and energy
inclusion projects. This helps increase the rural electricity con­
sumption ratio and improve the level of energy services for res­
idents, thereby increasing energy access and equity in energy use
[47]. In addition, carbon finance promotes clean energy appli­
cation and market development through carbon markets and
carbon trading, and boosts energy sharing on a larger scale [48].
In summary, green finance promotes local HED in five dimensions:
energy innovation, energy coordination, energy greening, energy
openness, and energy sharing through specific policy measures in green
credit, green securities, green insurance, green investment, and carbon
finance.
2.2.2. The spatial spillover effect of green finance on HED
The impact of green finance on HED is not only limited to the region
but can also spread to neighboring areas and has a cross-regional effect.
First, energy innovation and technology development supported by
green finance can have technology spillover effects, meaning that
advanced green energy technologies and best practices can be replicated
and adopted by other regions across geographic boundaries [49]. For
example, a successful clean energy project in one region can serve as a
learning example for other regions, attracting investment and technol­
ogy transfer and driving HED in neighboring regions.
Second, the success and returns generated by green finance support
J. Xu et al.
and investment in energy projects in one region can attract more capital
flows to that region and drive the development of energy projects in
neighboring regions. The diffusion of funds and investments can drive
the upgrading and transformation of the energy industry in neighboring
regions and promote HED [50].
Then, green finance promotes cooperation and experience sharing
among different regions. Regions can share best practices, technical
experiences, and policy experiences in green finance through coopera­
tion mechanisms to learn from each other. This cross-regional cooper­
ation and sharing of experiences can accelerate HED in neighboring
regions and form a benign regional development pattern.
Finally, the construction and development of regional energy supply
chains supported by green finance can lead to the linkage effect of
related industries. When a regional clean energy supply chain is formed,
it needs to link and coordinate with other regional supply chains to
achieve comprehensive HED [51]. This supply chain and industry
linkage effect can spread to neighboring regions and promote HED in the
whole region.
In summary, green finance has spatial spillover effects on HED,
which are realized through mechanisms such as technological innova­
tion and transfer, capital flow and investment diffusion, cross-regional
cooperation and shared experience, and supply chain and industry
linkage effects. These mechanisms promote interconnection and coop­
eration in the energy sector, promote HED in neighboring regions, and
form a cross-regional pattern of sustainable energy development.
3. Methodology
3.1. Method
3.1.1. Spatial autocorrelation test
To examine the spatial clustering characteristics of HED, the spatial
autocorrelation test is applied by using Moran’s index (Moran’s I). The
formula for Moran’s I is shown below.
/ Compared with the panel threshold effect model, it has the advantage of
∑N ∑ N
( ) ∑
N ∑
N
Moran’s I = Wij (yi − y) yj − y S2 Wij (1)
i=1 j=1 i=1 j=1
where yi denotes the HED in province i. y and S2 are the mean and
variance of the HED, respectively. Moran’s I take values in the range of
(− 1, 1). When the value is greater than 0, it indicates that HED is
spatially positively correlated, i.e., provinces with high (low) values of
HED are more likely to be surrounded by provinces with high (low)
values; when the value is less than 0, it indicates that HED is spatially
negatively correlated; i.e., provinces with low (high) values of HED are
more likely to be surrounded by provinces with high (low) values. In this
paper, the Z-statistic is chosen to test Moran’s I. The calculation formula
is shown below.
Z(Moran’s I) =
Moran’s I − E(Moran’s I)
√̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅̅ (2)
VAR(Moran’s I)
Among them, E(Moran’s I) = − 1
n− 1
.
3.1.2. Spatial durbin model
The presence of spatial dependence effects violates the assumption of
independence in traditional econometrics [52]. Spatial econometric
models are usually used to correct estimation bias caused by spatial
dependence [53]. Spatial dependence may occur separately or simul­
taneously in the dependent variable, the independent variable, the error
term, and spatial lag terms are included to control for different kinds of
spatial dependence effects [54]. Models that include spatially lagged
terms for the dependent variable suffer from serious endogeneity
problems [52]. Therefore, we use maximum likelihood estimation
(MLE) to avoid biased estimates of spatial parameters and standard
deviations [55]. In this paper, a series of selection tests for the spatial
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Energy Strategy Reviews 50 (2023) 101201
econometric model is performed. Models are selected between the
spatial autoregressive model (SAR), spatial error model (SEM), and
spatial Durbin model (SDM).
The SAR is given as:
Y = ρWY + βX + ε (3)
where Y is the HED, X represents the green finance and other control
variables, and W denotes the spatial weight matrix, which in this paper
uses the inverse distance weight matrix to measure. ρ stands for the
spatial autocorrelation coefficient, and β is the coefficient of the inde­
pendent variable. SAR identifies spatial spillover effects of dependent
variables among neighboring provinces, which in the text indicates that
HED spills over into surrounding provinces
The SEM is shown below:
Y = βX + ε, ε = λW + μ (4)
where X denotes the spatial spillover effect of unobservable variables in
neighboring provinces, and μ is the random disturbance term. SEM fo­
cuses on the spatial spillover effect of the omitted variable, which exists
in the error term.
The SDM is expressed as below:
Y = ρWY + βX + θWX + ε (5)
where θ denotes the spatial spillover effect of the independent variable.
The SDM includes both spatial spillover effects of dependent and inde­
pendent variables in the model. In our paper, this means that not only
does the HED itself impact the surrounding provinces, but also the
digital economy agglomeration and other control variables have spatial
spillover effects.
3.1.3. Spatial threshold model
To take the nonlinear relationship and spatial effects into account
simultaneously, we construct a spatial threshold model drawing on [56].
solving the problem of overestimating coefficients due to neglecting
spatial spillover effects. Compared with the spatial Durbin model, it has
the advantage that it can further consider the threshold effect in the time
dimension. Therefore, it can better reflect the comprehensive impact of
green finance on HED. Assume that the impact of green finance on HED
exists single threshold, the specifics of the model are as follows:
( ) ( )
HED = β0 + ρWHEDi,t + β1 GFi,t I GFi,t ≤ γ + β2 GFi,t I GFi,t > γ
( ) ( )
+θ1 WGFi,t I GFi,t ≤ γ + θ2 WGFi,t I GFi,t > γ + δXi,t + θWXi,t + μi + ηj + εi,t
(6)
where γ is the value estimated from the panel threshold model. β1 and β2
are the impact of green finance below and above the threshold on the
HED of local provinces, respectively. θ1 and θ2 are the impact of green
finance below and above the threshold on HED of surrounding prov­
inces, respectively. Other variables are defined above.
3.2. Description of variables
3.2.1. Dependent variable
The existing literature has used different indicator systems to eval­
uate the HED level [40,57,58]. Based on the existing literature and with
reference to the white paper "China’s Energy Development in a New
Era”, we construct an indicator system to measure the HED level for 30
provinces of China comprehensively. The system incorporates five di­
mensions of HED: energy innovation, energy coordination, energy
green, energy openness, and energy sharing.
Specifically, energy innovation represents the innovative capacity of
energy development, including energy sector investment, R&D invest­
ment intensity, R&D personnel input, and government spending on
science and technology. Energy coordination aims to indicate the degree
J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

of coordination of energy development, including four indicators: coal
consumption ratio, energy intensity, clean energy ratio, and tertiary
sector share. Green energy reflects the degree of environmental pro­
tection in the process of energy development, including four indicators:
pollution control investment, sewage treatment rate, exhaust emissions,
and environmental protection expenditure. Energy openness includes
the export ratio and foreign trade dependence. Energy sharing repre­
sents the equity in residential energy use and includes three indicators:
natural gas penetration, energy consumption per capita, and rural
electricity consumption ratio.
The evaluation of the indicator system generally has two methods:
subjective weighting and objective weighting. In subjective weighting,
the evaluator assigns weights to each indicator based on subjective
views; in objective weighting, weights are determined based on the
distribution structure and statistical properties of the data itself. To
avoid subjective factors in weight determination, we use the entropy
weighting method to objectively assign weights according to the degree
of variation of each index value. The comprehensive evaluation index
system and weights are given in Table 1.
3.2.2. Independent variable
Based on the definition of the White Paper on China’s Energy
Development in a New Era released by the Chinese State Council, this
paper divides the evaluation indexes into five dimensions green credit,
green securities, green insurance, green investment, and carbon finance
according to different types of financial services. The entropy method is
used to measure the development level of green finance in 30 Chinese
provinces from 2007 to 2020. The indicators at each level and the
measurements are shown in Table 2.
3.2.3. Control variable
To avoid misspecification of the model, we control for urbanization
rate (URB), industrial structure (IS), economic development level
(PGDP), and government intervention level (GI) that may affect HED
based on existing literature. The urbanization rate is represented by the
ratio of the urban population to the total population. The industrial
structure is measured as the ratio of secondary sector value added to
GDP. The level of economic development is measured using real GDP per
capita. The level of government intervention is calculated as the ratio of
government fiscal spending to GDP.
3.3. Data sources
The sample studied in this paper is 30 provinces and municipalities
in China. Since the policy of green finance started to emerge in China in
2007, the sample years selected for this paper are 2007–2020. The main
sources of data are the National Bureau of Statistics, provincial and
municipal statistical bureaus, and statistical yearbooks. Firm-level and
industry-related data are obtained from the CSMAR and WIND data­
bases. To reduce heteroskedasticity, all control variables in this paper
are taken as logarithms. The results of descriptive statistics of all vari­
ables are shown in Table 3.
4. Results
4.1. Spatial distribution of HED
Fig. 2 shows the spatial distribution of HED at the provincial level in
China. We can find that HED in China shows significant spatial differ­
ences. Beijing, Shanghai, and Guangdong have the highest level of HED,
followed by Tianjin, Jiangsu, and Zhejiang. The provinces with low
values of HED are mainly concentrated in the central and southwestern
regions of China. Guizhou, Guangxi, and Yunnan provinces have the
lowest HED levels in the country. This is because there are significant
differences in the level of economic development among China’s re­
gions, and such variations are reflected in the HED. The high level of
HED in regions such as Beijing, Shanghai, and Guangdong, which are
economically developed coastal regions, can be attributed to their
advanced economic structure, technological innovation, investment
environment, etc. In contrast, the relatively poorer natural resources and
lower industrial base of the central and western regions may be the main
reasons for their comparatively lower HED levels.
Regarding change, most provinces have improved their HED from
2007 to 2020, indicating that China’s energy development policies in
recent years have been effective. This may be attributed to the govern­
ment’s emphasis on HED and the effectiveness of the policies and
measures adopted in promoting energy restructuring, energy conserva­
tion and emission reduction, and technological innovation. In addition,
the provinces in the central and southwestern regions significantly
improved HED, indicating that the differences in HED between Chinese
regions are gradually decreasing. This may be influenced by the central
government’s policy support, investment in the central and western
regions, and local governments’ proactive efforts and measures. This

Table 1
Comprehensive evaluation index system of HED.
First-level Secondary indicators Measurement Unit Attribute
indicators

Energy Energy sector investment Energy sector investment per unit of GDP % +
Innovation R&D investment intensity R&D expenditure/GDP % +
R&D personnel input R&D employment as a percentage of total employment % +
Government spending on science and Government spending on science and technology as a percentage of % +
technology total government spending
Energy Coal consumption ratio Coal consumption as a percentage of total energy consumption % –
Coordination Energy intensity Energy consumption per unit of GDP Million tons of standard coal/102 –
million yuan
Clean energy ratio Clean energy as a percentage of total energy % +
Tertiary industry share Value added of the tertiary industry as a proportion of GDP % +
Green Energy Pollution control investment Investment in environmental pollution as a percentage of GDP % +
Sewage treatment rate Sewage treatment rate % +
Exhaust emissions Sulfur dioxide emissions per unit of GDP Million tons/billion yuan –
Environmental protection Environmental protection expenditure as a percentage of total % +
expenditure government expenditure
Energy Openness Export ratio Export to GDP ratio % +
Foreign trade dependence The ratio of total imports and exports to GDP % +
Energy Sharing Natural gas penetration The natural gas-using population as a percentage of the total % +
population
Energy consumption per capita Energy consumption per capita Million tons of standard coal/ –
10,000 people
Rural electricity consumption ratio Rural electricity consumption ratio % +

5
J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

Table 2 Table 3
Comprehensive evaluation index system of green finance. Descriptive statistics.
First-level Secondary Tertiary indicators Measurement Attribute Variable Obs Mean Std. Dev. Min Max
indicators indicators
HED 420 0.222 0.104 0.092 0.551
Green Green The share of Energy saving and + GF 420 0.304 0.134 0.104 0.804
Finance Credit environmentally environmental URB 420 4.005 0.234 3.341 4.495
listed companies protection listed IS 420 3.775 0.234 2.760 4.119
borrowing from companies PGDP 420 10.628 0.572 8.841 12.013
banks borrowing GI 420 17.291 0.760 14.699 18.975
amount/total
borrowing of
listed companies narrowing of regional disparities can help promote coordinated regional
The share of Six high-energy- – development in China and reduce economic inequality and uneven
interest expenses of consuming
the six high- industrial
development between regions.
energy-consuming industries’ To test the spatial clustering characteristics of HED, the Moran’s I
industries interest expenses/ index (Moran’s I) is used to test whether HED is spatially autocorrelated.
total interest a Moran’s I value significantly greater than zero implies that the spatial
expenses of
correlation of UPE is significantly positive during the observation
industrial
industries period. Table 4 shows the results of the global Moran’s I for each year.
Green The share of the The market + It can be seen that Moran’s I values for HED are significant for each
Securities market capitalization of year, which means that provinces with high (low) levels of HED are
capitalization of listed energy- more likely to be surrounded by high (low) levels of HED. In other
listed saving and
environmental environmental
words, UPEs in China are characterized by spatial clustering. This may
companies protection be due to a combination of factors. First, neighboring regions are closer
enterprises/total in terms of geographic location and economic ties, and similar industrial
market structures and energy use patterns exist, leading to a similarity in HED
capitalization of
levels. Second, policy transmission and technology spillover effects may
listed enterprises
The share of the The market value – also contribute to the spatial agglomeration phenomenon, where suc­
market value of the of listed cessful experiences and policy innovations in high-level regions can
six high-energy- enterprises in six have a positive impact through learning and imitation in neighboring
consuming high-energy- regions. In addition, Moran’s I gradually increases and becomes more
industries consuming
industries/total
significant during the sample period, indicating that the autocorrelation
market value of of HED is increasing yearly. This may be due to the advancement of
listed enterprises regional integration processes and the expansion of the reach of gov­
Green The share of Agricultural + ernment policies and measures.
Insurance agricultural insurance
insurance premium premium income/
income property 4.2. Spatial model selection test
insurance
premium income
The share of Agricultural + To select a suitable global spatial econometric model, we perform a
agricultural insurance payout series of standard spatial model selection tests [59]. First, a (robust) LM
insurance payouts expenses/ test based on a two-way fixed effects model shows that the (robust) LM
agricultural values for both the SAR and SEM models are significant, which implies
insurance
premium income
that a spatial econometric model should be chosen. Second, to further
Green The share of the Financial + test whether SDM can degenerate into SEM or SAR, Wald and LR tests
Investment scale of fiscal expenditure on were performed, respectively. The results show that the SDM is more
spending on energy-saving and appropriate. Third, a spatial Hausman test is performed, and the model
environmental environmental
is finally determined as a two-way fixed SDM. The test results of the
industries protection
industry/total model are shown in Table 5.
financial
expenditure
The share of Environmental + 4.3. Results of the spatial model
investment scale of pollution control
environmental investment/GDP The regression results based on SDM are shown in Table 6. The re­
pollution control sults show that the regression coefficient of green finance on HED is
Carbon Carbon emission Financial
significantly positive, indicating that green finance significantly con­
+
Finance loan intensity institutions’
domestic and tributes to HED. According to theoretical analysis, this is because green
foreign currency finance promotes energy innovation, energy coordination, energy
loan balances/ greening, energy opening, and energy sharing through a combination of
CO2 emissions
policies in green credit, green securities, green insurance, green in­
The share of the Number of Clean +
Clean Development Development vestment, and carbon finance, thus contributing to HED. In addition, the
Mechanism project Mechanism ρ coefficients are all positive and pass the 1% significance level test,
transaction volume projects/total which proves that there is a significant spatial spillover effect of HED.
number of This shows that the improvement of the local HED level positively af­
projects
fects the HED of the neighboring provinces. This spatial spillover effect
may originate from a variety of factors, such as economic linkages,
technology transfer, and policy borrowing. When a region implements
green finance policies and achieves a good level of HED, its experience,

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J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

Fig. 2. Spatial distribution of HED.

Table 4 Table 6
Results of spatial correlation test. Results of the spatial model.
Year I value Z value Year I value Z value Variable Coefficient Z value Variable Coefficient Z value

2007 0.008* 1.401 2014 0.017** 1.724 GF 0.040*** 3.7 W*GF 0.0343 1.55
2008 0.024** 1.940 2015 0.019** 1.773 POP 0.060*** 2.62 W*POP − 0.196*** − 4.96
2009 0.011* 1.538 2016 0.031** 2.183 IS 0.0139 0.99 W*IS 0.005 0.16
2010 0.013* 1.575 2017 0.038*** 2.416 PGDP − 0.019* − 1.69 W*PGDP 0.111*** 5.35
2011 0.020** 1.805 2018 0.040*** 2.471 GI 0.004 0.34 W*GI − 0.064*** − 2.87
2012 0.017** 1.696 2019 0.055*** 2.944 ρ 0.426
2013 0.014* 1.618 2020 0.064*** 3.255 R2 0.251
Log-likelihood 1178.409

Table 5 To address the difficulties in interpreting the coefficients of the spatial

Results of spatial model selection test. econometric model [60], proposed a decomposition of the direct, indi­
Tests Statistic Tests Statistic rect, and total effects. We follow their approach to decompose the spatial
LM-error 44.954*** Wald-spatial-lag 83.940*** effects of green finance on HED. Table 7 shows the decomposition results
Robust LM-error 36.841*** LR-spatial-lag 75.470*** of the SDM.
LM-lag 9.560*** Wald-spatial-error 28.480*** We find that the direct effect of green finance is significantly positive,
Robust LM-lag 1.447 LR-spatial-error 71.740***
indicating that the development of green finance promotes a significant
Hausman 157.6***
increase in local HED levels. The indirect effect is also significantly
positive, which indicates a significant spatial spillover effect. Therefore,
and results may be transmitted to neighboring regions through inter- the advantages of green finance development will also spread to
regional factor flows, thus promoting HED in neighboring regions. neighboring provinces. The results reveal the direct and spatial spillover
The estimation results do not directly reflect the marginal effects of effects of green finance on HED. On the one hand, the development of
the variables because of the inclusion of spatial lag terms in the model. green finance has a significant positive impact on local HED. This is

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J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

Table 7 introduction and promotion of green finance can incentivize the energy
Results of spatial decomposition. industry to transform and upgrade to a more environmentally friendly
GF POP IS PGDP GI and sustainable approach to energy development, thereby increasing
HED. Over time, the market becomes relatively saturated with the
Direct effect 0.047*** 0.039* 0.017 − 0.007 − 0.004
(0.012) (0.022) (0.016) (0.011) (0.011) supply of green finance products and services, and the autonomous
Indirect effect 0.085** − 0.276*** 0.019 0.169*** − 0.103*** green transformation of energy companies may slow down. Moreover,
(0.036) (0.062) (0.058) (0.035) (0.036) the energy industry is typically a large and complex system, and the
Total effect 0.131*** − 0.237*** 0.036 0.161*** − 0.106*** transformation and upgrading require time, resources, and the adaptive
(0.044) (0.066) (0.069) (0.040) (0.041)
capacity of firms and institutions. Therefore, the impact of green finance
may be significant initially, but over time, the inertia effect of the energy
because the implementation of green finance policies can promote the industry may lead to a relatively slower transition, thus diminishing the
development of the local green and sustainable energy sector by effect of green finance on HED. This reminds us that a single green
providing financial support, reducing financing costs, promoting tech­ finance policy may not be sufficient to achieve long-term and sustained
nological innovation, and strengthening risk management measures. energy transformation and high-quality development and that other
These policy measures help to reduce pollution emissions, increase en­ factors, such as technological innovation, industrial policy, and envi­
ergy efficiency, and improve the equity and reliability of energy supply, ronmental governance, need to be considered in an integrated manner to
thus promoting local HED. On the other hand, the development of green improve the long-term efficacy of HED.
finance also has a significant positive impact on the HED of neighboring Second, we take the Green Financial Reform and Innovation Pilot
regions. This means that the advantages and experiences of green Zone (GFPZ) policy in 2017 as a quasi-natural experiment. The estab­
finance are not limited to the local area, but also spread to neighboring lishment of the GFPZ encourages financial institutions to increase the
provinces. This is because the energy industry has regional connections share of green businesses and aims to promote the development of green
and dependencies, and HED in one region can positively influence the finance. Therefore, we use GFPZ as a proxy variable for green finance
energy development of neighboring provinces through the effects of and use different-in-different estimation methods to mitigate
technology transfer, investment diffusion, experience sharing, and endogeneity.
supply chain linkage. This spatial spillover effect helps to achieve co­ Specifically, we set a dummy variable that assigns a value of 1 to the
ordinated development between regions, reduce the gap in energy pilot regions Zhejiang, Jiangxi, Guangdong, Guizhou, and Xinjiang after
development levels, and form a healthy cycle of regional sustainable 2017, and 0 to the remaining regions and years. We replace the dummy
energy development patterns. variables with green finance variables for the regressions and the results
are shown in Table 9. It can be found that ρ, direct effect, indirect effect,
and total effect are still significantly positive. This indicates that our
4.4. Endogenous treatment conclusions are not misrepresented by the endogeneity bias.

In fact, provinces with high levels of HED tend to be more developed,

with greater investment in environmental protection and more devel­
oped financial institutions. Therefore, it is also possible that the increase
in HED has promoted the development of green finance. In other words,
there may be a reverse causal relationship between green finance and
HED. In addition, omitted variables and measurement errors can also
lead to endogenous problems, resulting in regression results that do not
converge to the true overall parameters. To solve the endogeneity
problem, two strategies are adopted in this paper.
First, we lag the green finance variable to mitigate reverse causality.
As can be seen from Table 8, the direct, indirect, and total effects of
green finance remain significantly positive after lag 1, 2, and 3 periods.
In addition, the ρ value is also still significantly positive. This indicates
that the main findings of this paper remain valid after excluding reverse
causality. Interestingly, the ρ, direct effect, spatial spillover effect, and
total effect all decrease gradually as the lag period increases. This sug­
gests that the impact of green finance on HED is persistent, but its
effectiveness weakens over time. This may be the result of a combination
of the initial push and regressive effects of green finance policies and the
inertia effect of the energy industry. During the initial policy period, the
4.5. Robustness tests
To further ensure the robustness of the empirical model estimation
results, the robustness of the baseline regression model was tested in the
following three aspects:
The first one is dependent variable substitution. Principal component
analysis (Pca) and entropy-weighted TOPSIS (Topsis) are used to re-
measure HED as a proxy, respectively.
The second is to replace the spatial weight matrix. We construct the
economic distance weight matrix (We), the neighboring weight matrix
(Wa), and the composite weight matrix (Wc), respectively. The elements
of the economic distance weight matrix are the inverse of the average
value of the real GDP per capita of the two provinces from 2007 to 2020
(with 2007 as the base period); the adjacency weight matrix is a 0–1
matrix, where the value of the matrix elements is 1 if the two provinces
border each other and 0 otherwise. the composite matrix is a weighted
average of the economic distance weight matrix and the geographic
distance weight matrix, and we assign a weight of 0.5 to each matrix.
The third is to replace the samples. Since there is a large gap between

Table 8 Table 9
Regression results of lagged variables. Differences-in-differences estimation.
L.GF L2. GF L3. GF DID POP IS PGDP GI

ρ 0.252*** 0.141** 0.141** ρ 0.385***

(0.062) (0.061) (0.059) (0.102)
Direct effect 0.040*** 0.038*** 0.035*** Direct effect 0.038*** 0.025 0.004 0.022* − 0.003
(0.013) (0.010) (0.003) (0.0127) (0.020) (0.009) (0.011) (0.008)
Indirect effect 0.013** 0.006* 0.006* Indirect effect 0.025* 0.016 0.003 0.014 − 0.002
(0.006) (0.003) (0.003) (0.014) (0.0161) (0.007) (0.009) (0.006)
Total effect 0.053*** 0.044*** 0.041*** Total effect 0.063*** 0.041 0.007 0.037* − 0.006
(0.018) (0.012) (0.011) (0.024) (0.034) (0.016) (0.019) (0.013)
Control variables YES YES YES Control variables YES
R2 0.433 0.830 0.849 R2 0.434
Log-likelihood 1115.477 1220.740 1243.019 Log-likelihood 1113.913

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J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

the data of four municipalities directly under the central government of Table 11
Beijing, Tianjin, Shanghai, and Chongqing and the data of other prov­ Threshold test results.
inces, the samples of these four municipalities are excluded here for re- Type Threshold F- P- Critical value
regression. In addition, the Covid-19 outbreak in China in 2020 resulted value value value
1% 5% 10%
in volatile macro data, which could potentially impact the estimation
results. To address this issue, we exclude the 2020 data and re-run the Single 0.317 11.110 0.060 17.024 11.329 10.711
threshold
regression. Double 0.372 7.150 0.380 17.923 12.678 10.199
The specific robustness tests are shown in Table 10 all regression threshold
results indicate that green finance promotes HED in the local and sur­
rounding provinces, thus further validating the robustness of the
benchmark regression model.
Table 12
Spatial threshold regression results.
5. Further discussion
GF < 0.317 GF > 0.317

5.1. Spatial threshold test ρ 0.459***

(0.055)
Direct effect 0.064** 0.110***
While the greening effect of green finance on the environment and (0.032) (0.040)
energy has been widely documented in the literature, the literature also Indirect effect 0.425*** 0.577***
suggests that the role of green finance may be related to its own level of (0.082) (0.106)
development. Therefore, we explore the nonlinear effects of green Total effect 0.490*** 0.687***
(0.093) (0.120)
finance on HED using green finance as a threshold variable. Green
Control variables YES YES
finance is characterized by low returns, long maturities, and high risks, R2 0.535
so the role of green finance often needs to reach a sufficient level to be Log-likelihood 1077.788
effective [15].
Before using the spatial panel threshold model, it is necessary to
of green finance also have stronger spatial spillover effects. This is not
verify the presence of panel threshold effects as well as the threshold
surprising since high levels of green finance are more likely to promote
values. The test results of the panel threshold effect are given in
advances in energy technology, which in turn affects the HED of the
Table 11. The results show that the panel threshold model has a single
surrounding provinces.
threshold and passes the 10% significance level test, indicating that the
In addition, high levels of green finance also have stronger spatial
panel threshold model is a single threshold model. It indicates that the
spillover effects. This is not surprising since high levels of green finance
effect of green finance on green development efficiency presents a single
are more likely to promote advances in energy technology, which in turn
threshold characteristic. In addition, the threshold estimation test shows
affects the HED of the surrounding provinces. Our results are different
that the single threshold of green finance is 0.317. Therefore, this paper
from Ref. [19]. Their results indicated that green finance would prompt
classifies green finance into the low level (GF < 0.317) and high level
local polluting enterprises to relocate to other places, harming the sur­
(GF ≥ 0.317) based on the threshold.
rounding areas’ environmental quality. Our results provide a new piece
Table 12 shows the regression results of the spatial threshold model.
of evidence for the positive spillover effects of green finance in terms of
In terms of local effects, green finance promotes HED at both high and
HED.
low levels. However, the effect of green finance is nearly twice as large
in the high-level period as in the low-level period. The possible reasons
are as follows. First, when the level of green finance development is
5.2. Spatial attenuation boundary
insufficient, the regulation tends to be less efficient. This will lead some
enterprises to engage in greenwashing to obtain financing [61], thus
In general, the spatial correlation of the variables gradually de­
causing HED to be not substantially promoted. When the development
creases as the distance between provinces increases. Therefore, the
level of green finance improves and the regulatory system gradually
spatial spillover effect of green finance on HED may exist only in a
matures, green finance will give full play to the promotion of HED.
certain spatial range. The geographical distance, economic disparities,
Second, HED relies on the development of energy technology, which is
and differences in policy regimes of different provinces may be
also one of the purposes of green finance. However, technology devel­
responsible for the certain scope limitation of the spatial spillover effect
opment often requires a certain level of financial investment to be
of green finance on HED. To estimate the spatial attenuation boundary,
realized. Therefore, a high level of green finance is more beneficial for
we set a distance threshold for the spatial weight matrix W, where the
energy technologies and thus is reflected in HED. In addition, high levels
corresponding elements are shown in the following equation.

Table 10
Results of the robustness test.
Model Replace explained variables Replace space weight matrices Replace samples Replace samples

Pca Topsis We Wa Wc Remove municipalities Remove 2020

ρ 0.144** 0.322*** 0.407*** 0.388*** 0.362*** 0.431*** 0.447***

(0.068) (0.056) (0.058) (0.057) (0.062) (0.093) (0.093)
Direct effect 0.047*** 0.036*** 0.036** 0.028** 0.039 0.043*** 0.043***
(0.009) (0.010) (0.015) (0.014) (0.015) (0.013) (0.013)
Indirect effect 0.057*** 0.016*** 0.023** 0.016* 0.021 0.033** 0.035**
(0.020) (0.006) (0.011) (0.010) (0.010) (0.016) (0.017)
Total effect 0.104*** 0.052*** 0.058** 0.045* 0.060 0.075*** 0.078***
(0.024) (0.014) (0.026) (0.023) (0.025) (0.026) (0.027)
Control variables YES YES YES YES YES YES YES
R2 0.285 0.831 0.175 0.248 0.156 0.434 0.434
Log-likelihood 1269.062 1232.882 1046.594 1066.039 1053.638 1016.032 957.963

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J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

⎧
⎨ 1 ,i ∕
⎪
= j if dij > dt
Wij = dij (7)
⎪
⎩
0, i = j if dij < dt

Where dt is the distant threshold. We set the initial value of dt to 250 km

and then gradually increase the step size by 250 km until dt reaches
2500 km. By setting different dt , we can investigate whether the spatial
spillover effect of green finance on HED attenuates with distance. In
addition, we can see the spillover range of green finance to HED to
provide suggestions for regional policy formulation.
From Fig. 3, it can be seen that green finance has a significant
contribution to the HED of all the surrounding provinces within 1750 km,
which indicates that promoting green finance has a powerful positive
externality. Among them, the development of green finance has been
particularly effective in promoting the surrounding 750 km provinces.
When the distance threshold is between 1000 and 1750 km, the spatial
spillover effect of green finance shrinks with distance. When it exceeds
2000 km, the positive externality of green finance starts to disappear [62]. Fig. 3. Spatial attenuation boundary test.
found that the spatial spillover effect of green finance on environmental
pollution exists only between 1500 and 1750 km, while we find that the
leveraging the synergies within the region, provinces can collectively
spatial spillover effect of green finance is present for HED within 1750 km.
drive HED and maximize the spatial spillover effect of green finance.
This implies that the impact of green finance in promoting HED may be
Fourth, expand green finance networks. As the spatial spillover effect
more widespread and its effects relatively distant.
gradually diminishes beyond the 1750 km threshold, it is essential to
extend the reach of green finance networks. Developing strategic part­
6. Conclusion
nerships with neighboring countries or provinces outside the immediate
radius can help expand the influence of green finance and foster regional
This paper constructs two indicator systems to measure the levels of
sustainability collaboration. Finally, conduct continuous monitoring
green finance and HED in 30 Chinese provinces from 2007 to 2020.
and evaluation. To ensure the effectiveness of green finance policies and
Using the constructed indicators, we apply the spatial Durbin model to
interventions, a robust monitoring and evaluation framework should be
examine the impact of green finance on HED. Additionally, we utilize
established. Regular assessment of the impact of green finance on HED
the spatial threshold model and the spatial decay boundary model to
and the extent of spillover effects will enable policymakers to make data-
explore the stage-specific impact and the boundary effect of green
driven decisions and refine their strategies accordingly.
finance. Our research findings indicate the following.
The current study also has some limitations that need to be explored
in future research. First, further optimization and expansion of the se­
(1) Green finance not only promotes local HED but also exhibits a
lection of green finance indicators to measure the development of green
positive spillover effect on surrounding provinces. This conclu­
finance is a potential reassurance. Second, the availability of enterprise
sion remains robust even after considering endogeneity and
microdata and city-level microdata will further clarify the relationship
conducting rigorous tests.
between green finance and HED. Third, with the maturity of some
(2) The influence of green finance on HED is lower during the low-
advanced spatial measurement techniques, the spatial effect of green
level period compared to the high-level period. Furthermore,
finance on HED can be explored more accurately.
the spatial spillover effect increases with the advancement of
green finance.
CRediT authorship contribution statement
(3) Green finance significantly impacts the HED of all neighboring
provinces within a 750 km radius, and the spatial spillover effect
Jiajun Xu: Conceptualization, Data curation, Methodology, Soft­
diminishes as the distance exceeds 750 km until it disappears
ware, Visualization, Writing – original draft. Jinchao Wang: Supervi­
entirely at a threshold of 1750 km.
sion, Validation, Writing – review & editing. Rui Li: Conceptualization,
Investigation, Formal analysis, Writing – original draft, Writing – review
Based on these findings, we propose the following policy recom­
& editing. Muxin Gu: Data curation, Investigation, Methodology,
mendations to promote HED: First, enhance green finance collaboration.
Writing – original draft.
Recognizing the spillover effect of green finance on HED, it is crucial to
establish collaborative mechanisms among provinces to maximize its
positive impact. Encouraging knowledge sharing, best practices ex­ Declaration of competing interest
change, and joint investment initiatives can foster a mutually beneficial
environment for sustainable energy development. Second, develop tar­ The authors declare that they have no known competing financial
geted green finance strategies. Considering the varying impact of green interests or personal relationships that could have appeared to influence
finance in different periods, policymakers should tailor their strategies the work reported in this paper.
accordingly. During low-level periods, additional efforts should be made
to enhance the effectiveness of green finance interventions and ensure Data availability
they deliver substantial outcomes. In high-level periods, leveraging the
momentum, policies can focus on scaling up existing green finance ini­ Data will be made available on request.
tiatives and exploring new avenues for even greater impact. Third,
strengthen regional cooperation. Given the significant impact of green Acknowledgments
finance within a 750 km radius, regional cooperation becomes essential.
Collaborative programs and platforms can be established to facilitate Our deepest gratitude goes to the anonymous reviewers and editors
knowledge exchange, joint projects, and investment initiatives. By for their careful work and thoughtful suggestions that have helped
improve this paper substantially.

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J. Xu et al. Energy Strategy Reviews 50 (2023) 101201

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