DOES TECHNOLOGICAL INNOVATION ALWAYS BOOST THE SHARE OF RENEWABLE ENERGY INVESTMENT? EVIDENCE FROM CHINA

Although technological innovation (TI) is vital for renewable energy development, it is unclear whether boosting a country’s TI level will inevitably accelerate capital shifts from fossil fuels to renewables. Focusing on China, this research utilizes a novel wavelet quantile-on-quantile method to assess TI’s effect on the share of renewable energy investment (SREI). Results show that the impact is nonlinear and time-varying. In the short and medium term, TI reduces SREI, and this negative effect is more pronounced at low quantiles of SREI. The reason is that TI in its early development stages predominantly concentrates on traditional energy sectors owing to their mature infrastructure. In contrast, renewable energy initiatives face extended payback periods and unvalidated technological feasibility, critical barriers that discourage risk-averse investors. However, in the long term, TI at high quantiles exerts a significant positive effect on SREI due to advanced technology and policy support for renewable energy. The finding validates the risk-return model, as TI elevates SREI via decreased risk. This study provides policymakers with critical insights into the dynamic effects of TI on SREI, enabling the design of effective policies to advance the shift to cleaner energy.