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Can green finance reduce carbon emission? A theoretical analysis and empirical evidence from China

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Abstract

As an important way for China to achieve its dual-carbon goal, green finance has become the foundation for promoting high-quality economic development in China. In order to clarify the mechanism of green finance on carbon emissions, this paper puts green finance into the economic model and deduces the relationship between green finance and carbon emission reduction. This paper is based on the panel data of 30 provinces in China (excluding Tibet, Hong Kong, Macao, and Taiwan) from 2008 to 2019, using the individual fixed effect model, dynamical model, mediator model, and SDM model to study the impact of green finance on carbon emissions and its impact path of upgrading of the industrial structure and the development of science and technology based on the measurement of the green finance development index of each province by the entropy method. The findings show that the development of green finance can reduce carbon emission significantly, which can be sustained until at least the third phase and generates spatial spillover effects; regional heterogeneity analysis finds that the development of green finance shows geographical discrepancies: compared with the eastern and western regions, the development of green finance in central region can reduce carbon emissions more significantly; not only can the development of green finance directly reduce carbon emission, but also through the upgrading of industrial structure and technological innovation. The research not only provides a new perspective and supplementary empirical evidence for understanding the carbon emission reduction effect of green finance, but also offers some useful references for green finance to contribute to carbon emission reduction.

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Funding

This paper is funded in accordance with the China Association for Science and Technology for the 2022 Graduate Science Popularization Ability Improvement Project (KXYJS2022064) Jiangsu Provincial Postgraduate Practice Innovation Program (KYCX23_1097).

Yizhi Chen thanks the China Association for Science and Technology for the 2022 Graduate Science Popularization Ability Improvement Project (KXYJS2022064) Jiangsu Provincial Postgraduate Practice Innovation Program (KYCX23_1097) for its support.

Author information

Authors and Affiliations

  1. School of Statistics and Mathematics, Guangdong University of Finance and Economics, Guangdong, 510320, China

    Peifeng Jiang

  2. School of Economics, Guangdong University of Finance and Economics, Guangdong, 510320, China

    Chaomin Xu

  3. School of Economics, Jinan University, Guangdong, 510632, China

    Yizhi Chen

Authors
  1. Peifeng Jiang
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  2. Chaomin Xu
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  3. Yizhi Chen
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Contributions

Author 1 (first author): Peifeng Jiang. PF contributed to the conceptualization, methodology, design, theoretical model derivation, and data analysis of the study and was a major contributor in writing the manuscript.

Author 2: Chaomin Xu. CX contributed to the investigation, former analysis, data analysis, validation, and writing of the study.

Author 3 (corresponding author): Yizhi Chen. YC contributed to the project administration, supervision, revising, and editing of the study.

All authors read and approved the final manuscript.

Corresponding author

Correspondence to Yizhi Chen.

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Ethics statement

No conflict of ethics.

Conceptualization

Under the background of the increasingly serious problem of carbon emissions, how China achieves “carbon peak” and “carbon neutrality” shows its pursuit of high-quality economic development and its responsibility of a major country. In addition, whether China can achieve “carbon peak” and “carbon neutrality” will significantly affect the global carbon reduction action. But there are few theoretical research on carbon emission and green finance. So this paper attempts to construct an economic model of green finance and carbon emission.

Methodology

This paper uses the individual fixed effect model, dynamical model, mediator model, and SDM model to study the impact of green finance on carbon emissions and its impact path of upgrading of the industrial structure and the development of science and technology.

Software

The data processing, modeling analysis, and plotting in this paper were carried out using Excel and Stata.

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Not applicable.

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Author statement

The manuscript describes original work and is not under consideration by any other journal. All authors have approved the manuscript that is enclosed.

Competing interests

The authors declare no competing interests.

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Responsible Editor: Eyup Dogan

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Cite this article

Jiang, P., Xu, C. & Chen, Y. Can green finance reduce carbon emission? A theoretical analysis and empirical evidence from China. Environ Sci Pollut Res (2024). https://doi.org/10.1007/s11356-024-33572-8

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  • DOI: https://doi.org/10.1007/s11356-024-33572-8

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