The effect of green credit policy on energy efficiency: Evidence from China

The green credit policy is expected to be an effective financial instrument for achieving energy conservation and emission reduction. This policy would discourage sectors of high pollution, high energy intensity, and overcapacity (known as "two high and one surplus" sectors) from obtaining financial support unless they improve their performance, which could be indicated as energy efficiency. Adopting the panel data of 36 sectors in China, this study employs the difference-in-differences method to estimate the effect of green credit policy on total factor energy efficiency and explore its corresponding influencing mechanisms. The main findings are as follows. First, the implementation of China's Green Credit Guidelines 2012 (GCG2012) could significantly improve total factor energy efficiency by 1.21 % in "two high and one surplus" sectors. Second, the positive effect of GCG2012 is different among sectors, and it is more significant in sectors with an energy-saving target, less percentage of state-owned enterprises, and a higher degree of trade openness. Third, GCG2012 could affect energy efficiency through three mechanisms: research and development investment, energy mix, and financing constraints. It is recommended to strengthen the coordination between the green credit policy and other policies, such as climateenergy and sci-technology policies.