Can green credit policy reduce corporate carbon emission intensity: Evidence from China's listed firms

Green credit policy is designed to address the global climate risk. However, few studies have investigated empirically whether green credit policy indeed reduces corporate carbon emission intensity. Based on firm-level data in China and a difference-in-differences model, this study explores how corporate carbon emission intensity evolves following the green credit policy. We find that, on the whole, the green credit can effectively reduce corporate carbon emission intensity, while the dynamic negative effect tends to alleviate after 2017. Specifically, green credit reduces corporate carbon emission intensity mainly through lowering investment carbon intensity and enhancing environmental supervision. However, the signaling mechanism of green credit does not significantly alleviate corporate carbon emission intensity. The green credit has a stronger reduction effect on corporate carbon emission intensity with third-party certification, non-state-owned ownership, and high financing constraint. We thereby suggest that innovations should be made to the standards and processes of green credit to ensure sustainability and stability. Quantitative and standardized corporate environmental information disclosure is essential for the low-carbon effect on green finance innovation.

Automated summary

Green credit policy effectively reduces corporate carbon emission intensity by lowering investment carbon intensity and enhancing environmental supervision. However, the signaling mechanism of green credit does not significantly alleviate corporate carbon emission intensity. Companies with third-party certification, non-state-owned ownership, and high financing constraint have a stronger reduction effect on corporate carbon emission intensity. Innovations should be made to the standards and processes of green credit to ensure sustainability and stability. Quantitative and standardized corporate environmental information disclosure is essential for the low-carbon effect on green finance innovation.