Government policies that fund "green" energy actually increase the total carbon footprint of the electricity sector.
April 1, 2026
Original Paper
Green Finance Reduces Direct but Increases Lifecycle Carbon Emissions in China's Electricity Sector
SSRN · 6502413
The Takeaway
While green finance successfully reduces direct CO2 emissions from power plants, it creates a 'carbon paradox' by triggering a massive surge in emissions from the factories that build wind turbines and solar panels. The carbon released from making the steel and polysilicon for new infrastructure outweighs the immediate savings from cleaner power generation.
From the abstract
Green finance (GF) is considered a useful policy tool for electricity sector decarbonization, yet existing assessments focus exclusively on direct CO2 emissions from fuel combustion and overlook the embodied emissions from the upstream chain. Here, we estimate the effects of GF on direct and lifecycle carbon emission intensities of China's electricity sector during 2011–2023. The results show that green finance reduces direct carbon intensity by approximately 2.6 percentage points per year,