Clean energy business expansion and financing availability: The role of government and market

Due to positive externalities, government-led solutions to clean energy financing challenges have become a consensus. However, there is still a lack of micro-level research on the role of government and market in corporate financing anchored in clean energy business. In light of this, we use business data from Chinese listed companies spanning 2007 to 2021 to investigate the causal relationship between their clean energy business expansion and financing. Furthermore, we uncover the heterogeneous impact of government and market in different chain links. Building upon these findings, we propose targeted policy recommendations: (1) While China's unique financing environment has a potential identification effect for driving clean energy business, it is not conducive to non-scale corporate financing. Tailored regional support can enhance access to finance for diverse enterprise types and drive industry innovation. (2) The government has a limited financing effect in the upstream segment, which could be enhanced through optimization of existing green credit policies and consideration of industrial chain relationships during the approval process. (3) Market yields a stronger financing effect than government, offering policy insights for other emerging economies seeking to develop clean energy.