Impact of Financial Support on Transforming China's Energy Economy

Abstract

This paper aims to study the financial tools and policies the People's Republic of China (PRC) can adopt to support its energy transformation initiatives. Improving the energy sector and expanding renewable energy sources are crucial to China's efforts to reduce its carbon emission by transitioning into a green energy economy. In this regard, finance-related problems are inextricably linked to China's financial growth and are one of the significant obstacles to its energy transitioning initiative. This study establishes a mixed-method approach to investigate its financial capability for the transformation phase and the ramifications to be incurred. A descriptive research design outlines data from the past three decades on its different renewable energy consumption. This research presents convincing proof demonstrating that financial progress is crucially significant and generates a total of 42.42% to the variety of green energy growth via an assessment utilizing macro-level data. Time series-based analysis with the vector autoregressive model (VAR) is used to compare the variables' past and current observations. The study's findings comprehensively demonstrate policy analysis, forecasting, and data describing China's fiscal ability to transform its energy economy through a practical approach such as green finance. The feasibility of equity financing, introducing financial instruments such as Green Bonds, and funding small-scale renewable energy projects is crucial in giving the nation the financial support necessary for the transformation. In particular, the capital sector is the most critical element, followed by foreign investment. Simple comparisons between the EU and US situations show that the EU approach is more pertinent; therefore, Chinese authorities should pay closer attention.