Government subsidies, rent-seeking and investment efficiency in China's renewable energy industry: The suppressing role of R&D investment

Under China’s low-carbon transition strategy, renewable energy investment efficiency is essential to drive green transformation and meet carbon neutrality goals. This study investigates the impact of government subsidies on investment efficiency in China’s renewable energy sector, emphasizing the roles of Research and Development (R&D) investment and rent-seeking behavior. Investment efficiency, measured inversely based on inefficient investment following the Richardson model, is negatively affected by subsidies (β = 0.0059, p < 0.05), with rent-seeking further exacerbating this impact (β = 0.12, p < 0.05 for the interaction term). R&D investment suppresses the adverse influence of subsidies on investment efficiency, as subsidies positively affect R&D investment (β = 0.0061, p < 0.01) and R&D investment positively influences investment efficiency (β = −0.104, p < 0.05). The interaction between rent seeking and government subsidies reduces the effectiveness of subsidies in boosting R&D investment (β = −0.109, p < 0.05). Subsample analysis reveals that subsidies reduce investment efficiency in State-Owned Enterprises (SOEs) (β = 0.0085, p < 0.1) but improve it in non-state-owned enterprises (non-SOEs) (β = −0.0143, p < 0.05), with rent-seeking exacerbating inefficiency in SOEs (β = 0.146, p < 0.05 for the interaction term). The study suggests that targeting subsidies based on firm characteristics and promoting innovation while avoiding rent-seeking could enhance their effectiveness and inform more sustainable and targeted energy policy interventions in the renewable energy sector.