Total Energy Use, Clean Energy, and Corporate Carbon Emissions: The Moderating Role of Firm‐Level Environmental Governance

This study explores the interconnections between total energy use, clean energy, and corporate carbon emissions, with a focus on the moderating role of firm-level environmental governance. We use an unbalanced panel dataset that includes 35,504 firm-year observations from 11 industries and 24 Asian countries, covering the years 2016–2023. For our baseline analysis, we apply generalized least squares (GLS) regression. Our findings show that higher total energy consumption increases corporate carbon emissions. In contrast, transitioning to clean energy significantly reduces emissions. Additionally, firm-level environmental governance weakens the relationship between total energy consumption and emissions. It also strengthens the effect of clean energy adoption on reducing emissions, thus improving the overall effectiveness of clean energy transition. Although firm-level environmental governance significantly reduces carbon emissions across all industries, clean energy adoption has a limited impact in environmentally sensitive industries. This limitation may be due to high energy demands and structural constraints in Asian markets. To address potential endogeneity arising from simultaneity, omitted variables, measurement error, and the dynamic nature of the model due to lagged values of carbon emissions, we use the two-step dynamic system generalized method of moments approach. Our results remain robust to alternative methods and measures. This study advances the literature on corporate governance and environmentalism by emphasizing the importance of environmental governance in reducing corporate carbon emissions, thereby supporting the UN's 2030 sustainability agenda.