Does Green Finance Influence CO2 to Achieve Carbon Neutrality in China?

Abstract

The advancement of green finance plays a pivotal role in filling the financing gap of carbon neutrality and promote the low-carbon transformation. However, there are relatively few empirical studies directly analyzing the nexus of green finance and carbon emission intensity, as well as their impact mechanism, nonlinear effect and spatial effect. Therefore, based on the panel data of 30 provinces and cities in China from 2007 to 2019, using System GMM (SYS-GMM), KHB, panel threshold model and spatial Durbin model (SDM), this paper investigates the effect and impact mechanisms of green finance on carbon emission (CO2). The results show that green finance significantly reduces CO2 intensity, which is still valid after a series of robustness tests. Second, the CO2 emission reduction effect of green finance exert asymmetric effects between financially developed and financially underdeveloped regions, industrially developed and industrially underdeveloped regions. Third, green finance mainly affects carbon emission intensity through factors such as FDI, energy consumption scale, energy intensity, green technology innovation, industrial structure upgrading and energy structure. Finally, CO2 emission reduction effect of green finance demonstrates nonlinear characteristics with diminishing marginal effects and spatial effects. Drawing upon these findings, this paper puts forward specific proposals on developing and innovating green finance to promote CO2 emission reduction and realize carbon neutrality.