This study examines the spatial effect of R&D capital and labor market distortions on the green total factor energy efficiency (GTFEE) using a dynamic spatial Durbin model in China from 2000 to 2018. The results show that 1) China's GTFEE exhibits path‐dependent and agglomeration characteristics in terms of time and space, respectively. In both spatial and temporal dimensions, an increase in local GTFEE stimulates future local GTFEE and inhibits future GTFEE growth in neighboring areas. 2) R&D capital market distortion has a continuous inhibiting effect on the local GTFEE in the short and long terms. R&D labor market distortion has a continuous stimulating effect on the local GTFEE, and its effect gradually strengthens. 3) R&D capital market distortion may indirectly weaken the GTFEE by inhibiting green innovation and industrial upgrading. R&D labor market distortion may indirectly improve the regional GTFEE by suppressing the energy rebound effect and improving green innovation. Based on these results, a series of policy recommendations are proposed.