Did investment become green in China? Evidence from a sectoral panel analysis from 2003 to 2012

Under conditions of policy incentives and energy transition, an investment is considered to become green if greater investment would support a reduction in the proportion of total energy consumption involving coal use. However, few empirical studies have attempted to investigate green investment in China at the sector level. Using panel data for 5 sectors in China between 2003 and 2012, we tested the relationships between investment and different factors, including carbon dioxide (CO2) emission reduction policies and energy structure, by building panel models for the national sample. The results demonstrated that investment did not become green and mainly relied on gross domestic product (GDP) during the 2003-2012 period in China. Although investments in the industry sector and the commerce and services sector were weakened by the CO2 emission regulations, Chinese climate policies had no effect on investment in the agriculture sector or the construction sector and had a positive effect on investment in the transportation sector. Moreover, the proportion of total energy consumption involving coal use had no effect on investment in the construction sector or the commerce and services sector but had a negative effect on investments in the agriculture sector and the transportation sector. Investment in the industry sector showed strong viscosity to low-price coal consumption. Finally, we propose a series of policy implications based on the test results, which may guide green investment.