Can green finance development abate carbon emissions: Evidence from China

Green finance has been treated as an important tool in the transformation process to low-carbon economy; however, it still remains a question whether the development of green finance could offer carbon savings, or inversely lead to more carbon debts. Based on panel data of 30 provincial administrative regions during 2008-2019, we use the fixed-effect model to examine the carbon emissions reduction effect of green finance. The empirical results suggest that green finance development exerts significantly negative influence on carbon emissions by energy consumption structure optimization and industrial structure upgrading. Besides, we also find that compared with green bond, green credit has a more pronounced carbon emissions reduction effect at present. Furthermore, the heterogeneity of green credit types and regional heterogeneity are both discussed in this study. It is indicated that the green credit oriented for energy conservation and environmental protection could restrain the carbon emissions more significantly while the green credit oriented for clean energy cannot contribute to cutting down carbon emissions as remark-ably as other types of green credit. As for regional heterogeneity, results suggest that green finance could curtail carbon emissions in the central and western regions, while this effect is not significant for provinces in the eastern part of China. Thus, the green finance policies should be implemented based on regional characteristics in order to abate carbon emissions more effectively.

Automated summary

Green finance is considered an important tool in the transition to a low-carbon economy, but its impact on carbon emissions has been questioned. Using panel data from 30 provincial administrative regions in China from 2008 to 2019, this study finds that the development of green finance has a significant negative effect on carbon emissions through optimizing energy consumption structure and upgrading industrial structure. Additionally, it is found that green credit has a more pronounced effect on carbon emissions reduction compared to green bonds. Regional heterogeneity is also considered, with the results showing that green finance can reduce carbon emissions in central and western regions, but not significantly in the eastern part of China. Therefore, regional characteristics should be taken into account when implementing green finance policies to effectively reduce carbon emissions.