Has the establishment of green finance reform and innovation pilot zones improved air quality? Evidence from China

The role of finance in environmental sustainability is becoming increasingly important. This study conducts a quasi-natural experiment using a sample of 146 prefecture-level cities from 2015 to 2019. It adopts difference-in-differences to examine the impact of China's green finance reform and innovations pilot zones (GFRIs) on urban air quality. The findings show that air quality has improved after the establishment of GFRIs, indicating that GFRIs have the potential to control air pollution levels. The mechanism tests indicate that the GFRIs are conducive to improving air quality through industrial structure upgrading and green innovation. Furthermore, the heterogeneity analyses show that the air quality in the south of the Qinling Mountains-Huaihe River line, in large and well-developed financially scaled cities, has improved significantly after the establishment of GFRIs.

Automated summary

This study uses a quasi-natural experiment to examine the impact of China's green finance reform and innovations pilot zones on urban air quality, based on a sample of 146 prefecture-level cities from 2015 to 2019. The findings indicate that air quality has improved after the establishment of green finance reform and innovations pilot zones, suggesting their potential in controlling air pollution levels. Mechanism tests suggest that the improvement in air quality is attributed to industrial structure upgrading and green innovation. Heterogeneity analyses further reveal significant improvements in air quality in the south of the Qinling Mountains-Huaihe River line, as well as in large and well-developed financially scaled cities.