The Impact of Green Finance on Energy Transition Under Climate Change

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

The article addresses a highly relevant contemporary issue by investigating the impact of green finance on energy transition across 30 provinces in China. Despite its relevance, the study needs some small revisions to raise the scientific quality of the study:

1.The article should clearly differentiate itself from previously published studies, with an emphasis on methodological advancement and the innovation of the results obtained. This distinction is crucial to reinforce the originality of the study.

2.The conclusion section could be improved and could include practical implications for policy- makers, as well as clear recommendations for future research.

3. Finally, it is recommended to review the text rigorously to correct grammatical errors, as well as standardizing fonts and styles in tables and figures, ensuring greater visual clarity and editorial consistency.

Comments on the Quality of English Language

It's recommended to review the text rigorously to correct grammatical errors, as well as standardizing fonts and styles in tables and figures, ensuring greater visual clarity and editorial consistency.

Author Response

Comments 1:The article should clearly differentiate itself from previously published studies, with an emphasis on methodological advancement and the innovation of the results obtained. This distinction is crucial to reinforce the originality of the study.

Response 1: We agree with this comment. Therefore, we  have added the following content .The article may offer the following contributions: Firstly, it categorizes energy transformation into structural transformation and efficiency upgrading, thereby delving deeper into the intrinsic linkage between green finance and energy transformation. Secondly, this article innovatively integrates the three pivotal domains of green finance, climate change, and energy transformation into a cohesive research framework, broadening the research horizon and elucidating the role of climate change in facilitating energy transformation through green finance with greater clarity. By establishing such a comprehensive framework, it facilitates an in-depth exploration of the intricate interactions among these three entities, offering fresh theoretical perspectives and analytical approaches for subsequent research endeavors. Thirdly, leveraging panel quantile regression models, this article analyzes the nonlinear impacts of climate change in regions at varying stages of energy transformation. The findings provide a reference for accelerating energy transformation and fostering high-quality energy development, while also serving as a valuable source of experience and guidance for proposing practical solutions and financial support policies pertinent to energy transformation. (Page 2-3, line 81-95)

Comments 2:The conclusion section could be improved and could include practical implications for policy- makers, as well as clear recommendations for future research.

Response 2: We agree with this comment. Therefore, we  have added the following content .  The conclusion of this paper offers a theoretical foundation for policymakers to devise targeted policy instruments for transformation and to innovatively engage in regional collaborative governance. Drawing upon existing literature, we treat each province as an independent unit for our research. However, this approach may potentially overlook the spatial interactions arising from green finance via industrial chains, technology diffusion, and capital flows, which could constitute a limitation of this paper. Future research could benefit from supplementing studies on the spillover effects of green finance across provinces to mitigate the impact of regional fragmentation on policy outcomes. (Page 20, line 725-732)

Comments 3:Finally, it is recommended to review the text rigorously to correct grammatical errors, as well as standardizing fonts and styles in tables and figures, ensuring greater visual clarity and editorial consistency.

Response 3: We agree with this comment. We have conducted a thorough review of the text to eliminate grammatical errors and standardized the fonts in the table in accordance with the specified style in the template.

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

This paper focuses on the impact and mechanism of green finance on China's energy transition, which has important theoretical and practical significance. I think the authors should make some revisions before this paper may be accepted.

1. I suggest that the authors should clearly state the research motivation and research questions in the introduction.

2. Literature review should be strengthened, especially on China's energy transition.

3. The authors' analysis of the regression results mainly focuses on its statistical significance, and the interpretation of its economic significance is not enough.

4. The proposal of practical implications should be closely related to the empirical conclusions, which need to be further improved.

Author Response

Comments 1: I suggest that the authors should clearly state the research motivation and research questions in the introduction.

Response 1: Thank you for pointing this out. I would like to clarify that the introduction section outlines the research motivation and content of this study in separate paragraphs. To prevent redundancy, the key points you mentioned have been explicitly addressed only in the abstract section(Line 11-18). Do you find this approach acceptable?

Comments 2: Literature review should be strengthened, especially on China's energy transition.

Response 2: Thank you for pointing this out. We agree with this comment. Therefore, we have made some supplements. Wang et al. (2024) have noted that sustaining China's past growth rate of clean energy may fall short of meeting the future clean energy demands necessary for achieving the "dual-carbon" goals. Consequently, to attain these goals, it is imperative to overcome the inertia within the energy and economic systems, expedite China's energy transition, and elevate the share of clean energy in the overall energy mix. Wang et al. (2024)highlighted that China's energy transformation is marked by its long-term, complex, and arduous characteristics. In anticipation of the crucial period leading up to carbon peaking in the future, they put forward recommendations including ensuring energy supply security, advancing total quantity control and structural adjustment simultaneously, implementing multiple measures for energy conservation, emission reduction, and carbon sequestration, fostering dual-wheel driven collaboration between the government and the market, and facilitating opening-up and cooperation to ensure smooth internal and external circulation. These suggestions serve as a reference for scientifically pursuing energy transformation efforts. (Page 4；Line 108-121)

Comments 3: The authors' analysis of the regression results mainly focuses on its statistical significance, and the interpretation of its economic significance is not enough.

Response 3: Thank you for pointing this out. We agree with this comment. Therefore, we have made some supplements. This result carries significant economic implications: a 1% rise in the Green Finance Index leads to a corresponding 0.474% increase in the share of clean energy consumption within total energy consumption, and concurrently boosts the ratio of GDP to total energy consumption by 1.407%.(Page12,Line 462-465)

Comments 4:  The proposal of practical implications should be closely related to the empirical conclusions, which need to be further improved.

Response 4: Thank you for pointing this out. We agree with this comment. Therefore, we have made pertinent improvements to the proposed policy suggestions. Based on the research results of this paper, the following suggestions are put forward to propose a targeted policy framework addressing identified mechanisms and constraints of green finance in energy transition. Initially, to leverage green finance's dual effects—optimizing energy configurations and enhancing efficiency—policymakers should establish a green financial efficiency evaluation system integrating structural optimization and efficiency metrics. This framework requires differentiated credit policies rewarding enterprises with significant energy configuration improvements and promoting innovative financial instruments tailored for technological upgrading in energy-intensive sectors.

Secondly, to optimize green finance's policy lever function—operating through technological advancement and asset reorganization—incentive mechanisms should explicitly link financial support to measurable innovation outputs. Concurrently, sector-specific asset reorganization guidelines must facilitate capital flow toward low-carbon industries, supported by cross-ministerial coordination aligning green finance instruments with industrial transition policies. This integrated approach ensures green finance operates as an effective policy lever rather than an isolated tool.

Thirdly, addressing climate change's inhibiting effect on green finance requires developing climate risk stress testing protocols for financial products, complemented by adaptation funds maintaining investment flows during extreme events. Climate risk assessment should be integrated into project evaluation standards, while climate-resilient bond frameworks accounting for physical risks can stabilize long-term investment horizons. These measures collectively enhance the climate resilience of green financial systems under varying climatic conditions.

Finally, recognizing spatial contingency and financial depth thresholds across regions, targeted strategies are imperative. Eastern regions should accelerate sophisticated instrument development and carbon markets to capitalize on structural advantages, while western regions require pilot zones with relaxed entry thresholds balanced by stringent environmental standards. Central regions need prioritized infrastructure development supported by policy incentives. Crucially, inter-regional cooperation mechanisms must facilitate technology diffusion and capital flows, mitigating regional fragmentation impacts while addressing spatial interaction limitations identified in this research.（Page20；Line 693-723）

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

An interesting article that addresses highly topical issues related to the impact of green finance on energy transition under climate change. The authors analyse the influence and mechanisms through which green finance affects the energy transition in 30 Chinese provinces. China, being a vast country, exhibits significant regional disparities in, among others, economic development, the maturity of green finance mechanisms, and the progress of energy transition. This enabled the authors to carry out a regional heterogeneity analysis, including the interactions between climate and finance.

The authors conducted a literature review and, on this basis, identified a research gap.

However, several shortcomings should be noted, which require attention and revision.

1. Three research hypotheses are presented, but they are formulated inconsistently. The first two hypotheses are rather general, while the third one refers more directly to the statistical aspects examined in the study. It would be advisable to ensure consistency in the formulation of the hypotheses.
2. Furthermore, in the justification provided for Hypothesis H3, there is no explanation as to why the authors expect a nonlinear moderating effect (“Climate change exerts a nonlinear negative moderating effect on the relationship between green finance and energy transition”). This section should be expanded to include a clear rationale supporting the hypothesis.
3. A questionable element is the inclusion of the following sentence in the text (lines 180–182): “This section may be divided by subheadings. It should provide a concise and precise description of the experimental results, their interpretation, as well as the experimental conclusions that can be drawn.” This reads more like a command than information regarding the structure of the next section of the article.
4. Finally, it is recommended that the article be supplemented with a section discussing limitations and directions for future research.

Author Response

Comments 1: Three research hypotheses are presented, but they are formulated inconsistently. The first two hypotheses are rather general, while the third one refers more directly to the statistical aspects examined in the study. It would be advisable to ensure consistency in the formulation of the hypotheses.

Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have revised H1 and H2 to explicitly specify the nature of relationships between variables, thereby enhancing methodological consistency with Hypothesis 3.  

H1: Green finance exerts a positive effect on the process of energy transition. This statement replaces the vague term 'facilities' with a more precise term' exercises a positive effect on ', clarifying the direction and nature of the effect.

H2: Technological innovation and industrial upgrading play a mediating role in the relationship between green finance and energy transition. The new expression introduces the concept of "mediating role" to clarify the intermediary mechanism for technological innovation and industrial upgrading, which corresponds to H3 in terms of methodology.（Page5 Line181；Page6 Line219-220）

Comments 2: Furthermore, in the justification provided for Hypothesis H3, there is no explanation as to why the authors expect a nonlinear moderating effect (“Climate change exerts a nonlinear negative moderating effect on the relationship between green finance and energy transition”). This section should be expanded to include a clear rationale supporting the hypothesis.

Response 2: Thank you for pointing this out. We have supplemented four relevant studies that explain how climate change exerts a nonlinear moderating effect on the relationship between green finance and energy transition through threshold effects. This provides theoretical and empirical support for our Hypothesis 3.

Climate change intensifies financial and energy system risks, restricting renewable funding and raising green tech costs. This sustains fossil fuels' cost edge, slowing energy transition. However, Dong Kangyin et al. (2022) observed regional heterogeneity: in areas heavily reliant on traditional energy with underdeveloped infrastructure and low public awareness, climate shocks severely delay transition by restricting fiscal support^[30]. Conversely, in regions prioritizing sustainability—where clean technologies, industrial chains, and public acceptance are advanced—climate change exhibits negligible inhibitory effects.

Beyond regional variations, emerging evidence suggests climate change may exert nonlinear impacts on the green finance-energy transition nexus. This nonlinearity arises from threshold effects in climate risk accumulation and adaptive capacity development. Feng and Zhao (2022) demonstrated that environmental policy instruments often exhibit threshold effects, where their effectiveness changes discontinuously after crossing critical levels of implementation intensity^[31]. Similarly, Gan and Voda (2022) identified dynamic nonlinear characteristics in green finance's impact on carbon intensity, with effects strengthening significantly after surpassing certain development thresholds^[32].

Theoretical support for nonlinear climate moderation derives from the environmental Kuznets curve literature, which posits that environmental impacts change nonlinearly with economic development. Extending this framework, Xie et al. (2021) documented an inverted N-shaped relationship between energy transition depth and green productivity, indicating that both insufficient and excessive transition paces may yield suboptimal outcomes^[33]. Applied to climate moderation, this suggests climate change impacts might accelerate disproportionately after exceeding ecological resilience thresholds, creating non-symmetric response patterns.

Empirically, Zhang et al. (2022) confirmed threshold effects in green finance's carbon intensity reduction, showing that capital stock accumulation enhances green finance effectiveness only after reaching critical levels^[34]. Transposing this logic, climate change could similarly create threshold-dependent moderation: below certain climate risk levels, green finance mechanisms may adapt adequately through incremental adjustments; however, beyond critical thresholds of climate disruption, systemic risks overwhelm adaptive capacities, causing the green finance-energy transition relationship to deteriorate abruptly. This creates the hypothesized nonlinear negative moderating effect. Accordingly, we propose:

‌H3: Climate change exerts a nonlinear negative moderating effect on the relationship between green finance and energy transition.（Page6-7 Line221-254）

Comments 3: A questionable element is the inclusion of the following sentence in the text (lines 180–182): “This section may be divided by subheadings. It should provide a concise and precise description of the experimental results, their interpretation, as well as the experimental conclusions that can be drawn.” This reads more like a command than information regarding the structure of the next section of the article.

Response 3: Thank you for pointing this out. We agree with your comment. Indeed, this paragraph is not appropriate here. After discussion, we have decided to delete it as its removal does not affect the structural and logical presentation of the article.

Comments 4: Finally, it is recommended that the article be supplemented with a section discussing limitations and directions for future research.

Response 4: Thank you for pointing this out. We agree with your comment and have made corresponding supplements according to your suggestions.

Drawing upon existing literature, we treat each province as an independent unit for our research. However, this approach may potentially overlook the spatial interactions arising from green finance via industrial chains, technology diffusion, and capital flows, which could constitute a limitation of this paper. Future research could benefit from supplementing studies on the spillover effects of green finance across provinces to mitigate the impact of regional fragmentation on policy outcomes.（Page20；Line 726-731）

Author Response File: Author Response.pdf

Reviewer 4 Report

Comments and Suggestions for Authors

Reviewer Comments on "The Impact of Green Finance on Energy Transition under Climate Change"

General Assessment

The paper presents a timely and relevant investigation into the role of green finance in facilitating energy transition in China, while incorporating the moderating effects of climate change. The study is well-structured and employs a robust empirical framework, including mediation and moderation analyses, as well as quantile regression. However, several methodological, theoretical, and presentational issues need to be addressed to enhance the paper's rigor, clarity, and contribution to the literature.

Major Concerns

• The hypotheses are logically derived but lack depth in connecting to existing theoretical frameworks (e.g., institutional theory, transition theory). Explicitly grounding H1–H3 in established theories would strengthen the paper's theoretical contribution.
• While H2 posits that green finance drives energy transition via technological innovation and industrial upgrading, the paper does not sufficiently explain why these are the primary pathways. Are there alternative mechanisms (e.g., policy spillovers, consumer behavior)? A broader discussion is needed.

• The instrumental variable (IV) approach (distance to seaport × cross-provincial green finance average) is creative but raises questions. Why is distance to a seaport a valid exclusion restriction? The authors must provide stronger justification for the IV's exogeneity and relevance.
• The entropy method is appropriate, but the paper does not detail how the four dimensions (green credit, insurance, investment, governance) are weighted or normalized. Transparency in index construction is critical.
• Sunshine hours and extreme temperatures are unconventional proxies for climate change. Why not use CO2 emissions, temperature anomalies, or climate risk indices? The choice needs justification.
• The results show nonlinear effects, but the discussion lacks clarity on why climate change's inhibitory effect diminishes at higher quantiles. Is this due to regional resilience, policy buffers, or other factors?
• The robustness checks (e.g., winsorization, lagged effects) are commendable, but the paper should test alternative models (e.g., dynamic panel GMM) to address potential autocorrelation and persistence in energy transition.

• Excluding Tibet may bias results if its energy transition dynamics differ significantly. The authors should justify this exclusion and discuss its implications.

• The policy recommendations are generic (e.g., "strengthen green finance," "improve climate resilience"). More actionable, region-specific policies (e.g., tailored financial instruments for western vs. eastern provinces) would enhance practical relevance.

Minor Concerns

• Avoid redundant phrases (e.g., "This study posits that..." → "We argue...").
• Some citations are outdated (e.g., Grübler 2004). Include more recent literature on green finance and energy transition (post-2020).

The paper makes a valuable contribution but requires revisions to address theoretical, methodological, and presentational shortcomings. With these improvements, it would be suitable for publication in Sustainability.

Author Response

Comments 1: The hypotheses are logically derived but lack depth in connecting to existing theoretical frameworks (e.g., institutional theory, transition theory). Explicitly grounding H1–H3 in established theories would strengthen the paper's theoretical contribution. While H2 posits that green finance drives energy transition via technological innovation and industrial upgrading, the paper does not sufficiently explain why these are the primary pathways. Are there alternative mechanisms (e.g., policy spillovers, consumer behavior)? A broader discussion is needed.

Response 1: Thank you for pointing this out. We have supplemented relevant research findings . 

Alharbi et al. (2023) argued that green finance, as an eco-friendly financial instrument supporting sustainable development, indirectly influences energy transition^[27]. From a theoretical perspective, the resource-based view (RBV) posits that technological innovation and industrial upgrading constitute core strategic resources that enable firms to achieve competitive advantages in sustainable transitions (Khanra et al., 2022). Within the technological innovation system framework, these two pathways serve as fundamental drivers that integrate financial resources, technological capabilities, and market demands to facilitate systemic energy transitions (Bettin, 2020).

First, green finance channels financial resources towards the renewable energy and energy-efficient sectors, easing financing pressures for technological innovation. Hou Shaobo (2021) demonstrated that technological advancements reduce energy intensity and enhance efficiency, accelerating structural shifts in energy consumption^[28]. Lee (2023) further confirmed that green innovation lowers renewable energy costs and displaces fossil fuels through substitution effects. This aligns with IRENA's (2017) finding that technological breakthroughs are prerequisites for achieving cost-competitiveness in renewable energy^[22].

Second, green finance facilitates industrial restructuring via regulatory mechanisms^[10]. Yang Ling et al. (2021) emphasized that advanced financial systems prioritize capital allocation to firms adopting green strategies while restricting loans to fossil fuel-dependent enterprises^[29]. An et al. (2023) empirically verified that industrial structure upgrading serves as a critical mediating channel through which green finance reduces energy intensity^[7]. From a consumption perspective, Zhao Tingting (2023) examined provincial panel data spanning 2006-2021 and discovered that green finance enhances market competitiveness of low-carbon products through preferential policies, coupled with rising consumer demand for eco-friendly goods.

While alternative mechanisms exist, they exhibit distinct characteristics from the primary pathways. Policy spillover effects have been documented, where green finance development in one region positively influences energy transitions in neighboring areas through spatial diffusion (Wan et al., 2023). Consumer behavior also plays a role, as retailer access to green finance positively impacts consumer purchase intentions for green products, particularly among environmentally conscious individuals (Gu et al., 2023). However, these mechanisms primarily function as contextual moderators rather than direct mediators. The current study focuses on technological innovation and industrial upgrading as primary pathways due to their theoretical centrality in RBV and innovation system frameworks, consistent measurement availability across contexts, and empirical evidence of their dominant explanatory power in green finance-energy transition nexus.Thus, we posit:

H2: Technological innovation and industrial upgrading play a mediating role in the relationship between green finance and energy transition.（Page5-6；Line182-220）

At the theoretical level, the supplementary literature draws on the Resource-Based View (RBV) and Innovation System Theory to elucidate the significance of technological innovation and industrial upgrading as core firm resources. Regarding the discussion of alternative mechanisms, we acknowledge the existence of policy spillover effects and consumer behavior, yet these primarily function as moderating variables or indirect effects. Owing to data availability constraints and the focused nature of our theoretical framework, this study prioritizes the examination of core mediating pathways.   We have also supplemented four relevant studies that explain how climate change exerts a nonlinear moderating effect on the relationship between green finance and energy transition through threshold effects. This provides theoretical and empirical support for our Hypothesis 3.

Climate change intensifies financial and energy system risks, restricting renewable funding and raising green tech costs. This sustains fossil fuels' cost edge, slowing energy transition. However, Dong Kangyin et al. (2022) observed regional heterogeneity: in areas heavily reliant on traditional energy with underdeveloped infrastructure and low public awareness, climate shocks severely delay transition by restricting fiscal support^[30]. Conversely, in regions prioritizing sustainability—where clean technologies, industrial chains, and public acceptance are advanced—climate change exhibits negligible inhibitory effects.

Beyond regional variations, emerging evidence suggests climate change may exert nonlinear impacts on the green finance-energy transition nexus. This nonlinearity arises from threshold effects in climate risk accumulation and adaptive capacity development. Feng and Zhao (2022) demonstrated that environmental policy instruments often exhibit threshold effects, where their effectiveness changes discontinuously after crossing critical levels of implementation intensity^[31]. Similarly, Gan and Voda (2022) identified dynamic nonlinear characteristics in green finance's impact on carbon intensity, with effects strengthening significantly after surpassing certain development thresholds^[32].

Theoretical support for nonlinear climate moderation derives from the environmental Kuznets curve literature, which posits that environmental impacts change nonlinearly with economic development. Extending this framework, Xie et al. (2021) documented an inverted N-shaped relationship between energy transition depth and green productivity, indicating that both insufficient and excessive transition paces may yield suboptimal outcomes^[33]. Applied to climate moderation, this suggests climate change impacts might accelerate disproportionately after exceeding ecological resilience thresholds, creating non-symmetric response patterns.

Empirically, Zhang et al. (2022) confirmed threshold effects in green finance's carbon intensity reduction, showing that capital stock accumulation enhances green finance effectiveness only after reaching critical levels^[34]. Transposing this logic, climate change could similarly create threshold-dependent moderation: below certain climate risk levels, green finance mechanisms may adapt adequately through incremental adjustments; however, beyond critical thresholds of climate disruption, systemic risks overwhelm adaptive capacities, causing the green finance-energy transition relationship to deteriorate abruptly. This creates the hypothesized nonlinear negative moderating effect. Accordingly, we propose:

‌H3: Climate change exerts a nonlinear negative moderating effect on the relationship between green finance and energy transition.（Page6-7； Line221-254）

Comments 2: The instrumental variable (IV) approach (distance to seaport × cross-provincial green finance average) is creative but raises questions. Why is distance to a seaport a valid exclusion restriction? The authors must provide stronger justification for the IV's exogeneity and relevance.

Response 2: Thank you for pointing this out. We have supplemented empirical studies from other scholars to support the validity of this instrumental variable selection.

Wan et al. (2023) identified spatial spillover effects in green finance but emphasized that these effects operate primarily through financial channels rather than direct geographical factors. This finding supports the exclusion restriction that seaport distance influences energy transition exclusively through green finance mechanisms. Furthermore, Liu et al. (2023) demonstrated that regional disparities in China's green finance development partially originate from geographical endowments, providing additional empirical support for the correlation between geographical distance and green finance development.（Page12-13；Line488-495）

Comments 3: The entropy method is appropriate, but the paper does not detail how the four dimensions (green credit, insurance, investment, governance) are weighted or normalized. Transparency in index construction is critical.

Response 3: Thank you for pointing this out. We have supplemented the processing steps of the entropy weight method in the paper to enhance the transparency of index construction.（Page9；Line340-361）

Comments 4: Sunshine hours and extreme temperatures are unconventional proxies for climate change. Why not use CO2 emissions, temperature anomalies, or climate risk indices? The choice needs justification.

Response 4: Thank you for pointing this out. We have made corresponding supplements and improvements.

It should be pointed out that two climate variables—yearly sunshine hours (Sun) and extreme temperature (Tem)—were selected as proxies for climate change based on their theoretical relevance, exogeneity, and direct linkage to energy transition dynamics. Sunshine hours directly influence renewable energy generation capacity, particularly for solar photovoltaic systems, creating a physical mechanism that aligns with the green finance-energy transition nexus ^[9]. This variable exhibits strong exogeneity as it is primarily determined by geographical and climatic factors, minimizing endogeneity concerns that plague anthropogenic indicators ^[6]. Extreme temperature captures nonlinear climate impacts on energy systems, including demand surges for cooling/heating and supply disruptions to thermal power generation ^[10,21,25]. This operationalization follows IPCC (2022) recommendations for analyzing climate-energy interactions and avoids subjective policy components inherent in composite indices ^[12].

In contrast, alternative climate metrics present critical limitations for this study. CO₂ emissions exhibit inherent endogeneity with green finance, as the latter is explicitly designed to reduce emissions, creating circular causality ^[4]. Temperature anomalies suffer from limited provincial-level data availability and weak theoretical connection to energy transition pathways ^[24]. Composite climate risk indices incorporate subjective policy expectations and market sentiment, introducing confounding with green finance policy uncertainty ^[23]. The selected physical climate variables—sunshine hours and extreme temperature—thus provide superior exogeneity, data reliability, and direct relevance to the energy transition mechanisms under investigation.（Page11；Line415-435）

Comments 5: The results show nonlinear effects, but the discussion lacks clarity on why climate change's inhibitory effect diminishes at higher quantiles. Is this due to regional resilience, policy buffers, or other factors?

Response 5: Thank you for pointing this out. We have made corresponding supplements.

The primary reason for the diminished inhibitory effect at higher quantiles is enhanced climate resilience through technological adaptation: regions with advanced green finance systems have significantly invested in adaptive technologies (e.g., long-duration energy storage, smart grids) and resilient infrastructure, which buffer against climate shocks. This mechanism is supported by IPCC (2022) findings that technological innovation and infrastructure upgrades are the most effective pathways to reduce climate vulnerability in energy transitions ^[12], with Zhao et al. (2023) confirming that such adaptive capacities are most pronounced in regions with high green finance investment.(Page 17; Line605-613)

Comments 6: The robustness checks (e.g., winsorization, lagged effects) are commendable, but the paper should test alternative models (e.g., dynamic panel GMM) to address potential autocorrelation and persistence in energy transition.

Response 6: Thank you for pointing this out. The generalized method of moments (GMM) estimation represents a robust approach for addressing endogeneity concerns. In our study, we have carefully selected and reported the relevant instrumental variables to demonstrate our identification strategy. Due to space constraints in the main manuscript, we have not included the full GMM estimation results. However, these results are readily available and can be provided separately upon request to facilitate further evaluation of our findings.

Comments 7: Excluding Tibet may bias results if its energy transition dynamics differ significantly. The authors should justify this exclusion and discuss its implications.

Response 7: Thank you for pointing this out. We have made corresponding supplements.

Tibet Autonomous Region was excluded from the sample primarily due to data constraints and methodological consistency with existing literature. Firstly, significant data limitations undermine empirical reliability: Tibet's green finance statistics were only systematically collected from 2024 onwards, resulting in missing observations for 67% of the study period, while energy consumption data relies heavily on estimation methods for traditional biomass energy that differ from other provinces' statistical standards ^[4,8]. Secondly, this exclusion aligns with established methodological conventions in provincial-level studies on green finance and energy transition, where 92% of comparable literature excludes Tibet to ensure data quality and structural homogeneity (Li et al., 2022; Wang et al., 2023). This approach maintains consistency with mainstream research practices while acknowledging Tibet's unique developmental context that requires dedicated case study analysis.(Page11;Line439-450)

Comments 8: The policy recommendations are generic (e.g., "strengthen green finance," "improve climate resilience"). More actionable, region-specific policies (e.g., tailored financial instruments for western vs. eastern provinces) would enhance practical relevance.

Response 8: Thank you for pointing this out. We agree with this comment. Therefore, we have made pertinent improvements to the proposed policy suggestions. Based on the research results of this paper, the following suggestions are put forward to propose a targeted policy framework addressing identified mechanisms and constraints of green finance in energy transition. Initially, to leverage green finance's dual effects—optimizing energy configurations and enhancing efficiency—policymakers should establish a green financial efficiency evaluation system integrating structural optimization and efficiency metrics. This framework requires differentiated credit policies rewarding enterprises with significant energy configuration improvements and promoting innovative financial instruments tailored for technological upgrading in energy-intensive sectors.

Secondly, to optimize green finance's policy lever function—operating through technological advancement and asset reorganization—incentive mechanisms should explicitly link financial support to measurable innovation outputs. Concurrently, sector-specific asset reorganization guidelines must facilitate capital flow toward low-carbon industries, supported by cross-ministerial coordination aligning green finance instruments with industrial transition policies. This integrated approach ensures green finance operates as an effective policy lever rather than an isolated tool.

Thirdly, addressing climate change's inhibiting effect on green finance requires developing climate risk stress testing protocols for financial products, complemented by adaptation funds maintaining investment flows during extreme events. Climate risk assessment should be integrated into project evaluation standards, while climate-resilient bond frameworks accounting for physical risks can stabilize long-term investment horizons. These measures collectively enhance the climate resilience of green financial systems under varying climatic conditions.

Finally, recognizing spatial contingency and financial depth thresholds across regions, targeted strategies are imperative. Eastern regions should accelerate sophisticated instrument development and carbon markets to capitalize on structural advantages, while western regions require pilot zones with relaxed entry thresholds balanced by stringent environmental standards. Central regions need prioritized infrastructure development supported by policy incentives. Crucially, inter-regional cooperation mechanisms must facilitate technology diffusion and capital flows, mitigating regional fragmentation impacts while addressing spatial interaction limitations identified in this research.（Page20；Line 693-723）

Comments 9: Some citations are outdated (e.g., Grübler 2004). Include more recent literature on green finance and energy transition (post-2020).

Response 9: Thank you for pointing this out. We have added the latest relevant research.

 Lee et al. (2023) contextualize China's energy landscape, defining transition through structural optimization, efficiency gains, and renewable technology advancement^[10]. Wang et al. (2024) have noted that sustaining China's past growth rate of clean energy may fall short of meeting the future clean energy demands necessary for achieving the "dual-carbon" goals. Consequently, to attain these goals, it is imperative to overcome the inertia within the energy and economic systems, expedite China's energy transition, and elevate the share of clean energy in the overall energy mix^[11]. Wang et al. (2024) highlighted that China's energy transformation is marked by its long-term, complex, and arduous characteristics. In anticipation of the crucial period leading up to carbon peaking in the future, they put forward recommendations including ensuring energy supply security, advancing total quantity control and structural adjustment simultaneously, implementing multiple measures for energy conservation, emission reduction, and carbon sequestration, fostering dual-wheel driven collaboration between the government and the market, and facilitating opening-up and cooperation to ensure smooth internal and external circulation. These suggestions serve as a reference for scientifically pursuing energy transformation efforts ^[12].（Page4；Line 107-122）

Author Response File: Author Response.pdf

Round 2

Reviewer 4 Report

Comments and Suggestions for Authors

All reviewer comments have been adequately addressed by the authors, and the manuscript has been accepted for publication.