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Can green finance development abate carbon emissions: Evidence from China

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  • Wang, Jiaqi
  • Tian, Jiaxin
  • Kang, Yuxin
  • Guo, Kun

Abstract

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 remarkably 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.

Suggested Citation

  • Wang, Jiaqi & Tian, Jiaxin & Kang, Yuxin & Guo, Kun, 2023. "Can green finance development abate carbon emissions: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 73-91.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:73-91
    DOI: 10.1016/j.iref.2023.06.011
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    References listed on IDEAS

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    1. Tobias S. Schmidt, 2014. "Low-carbon investment risks and de-risking," Nature Climate Change, Nature, vol. 4(4), pages 237-239, April.
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    Cited by:

    1. Yuanxin Li & Xinmiao Zhou & Huihong Liu & Jia Wu, 2024. "Incentive or Barrier: Evidence from Environmental Policy and Corporate Sustainability in China," Sustainability, MDPI, vol. 16(24), pages 1-34, December.
    2. Lijiali Huang & Xueqiong Wang & Yanwen Sheng & Jinli Zhao, 2025. "Impact of Venture Capital on Urban Carbon Emissions: Evidence from the Yangtze River Delta Urban Agglomeration in China," Sustainability, MDPI, vol. 17(2), pages 1-25, January.
    3. Danhong Shen & Xiaorong Guo & Shenglin Ma, 2024. "Study on the Coupled and Coordinated Development of Climate Investment and Financing and Green Finance of China," Sustainability, MDPI, vol. 16(24), pages 1-20, December.
    4. Xiuli Liu & Jing Cui & Yanrui Wu & Xiaohang Yue & Jun Shen & Pibin Guo, 2024. "The Nexus between Green Finance and Carbon Emissions: Evidence from Maturity Mismatch in China," Sustainability, MDPI, vol. 16(10), pages 1-24, May.
    5. Xi Zhao & Siqin Zhang & Najid Ahmad & Shuangguo Wang & Jiaxing Zhao, 2024. "Unlocking Sustainable Growth: The Transformative Impact of Green Finance on Industrial Carbon Emissions in China," Sustainability, MDPI, vol. 16(18), pages 1-21, September.
    6. Lu, Juan & Li, He & Yang, Ran, 2024. "Low carbon finance drives corporate carbon emissions reduction: A perspective from issuing carbon neutral bonds," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    7. Muhtar Sapiri & Aditya Halim Perdana Kusuma Putra, 2023. "Causality of Bank Financial Performance, Green Bond, CSR, Green Financing Portfolio and CO2 Emissions in Transportation: Evidence from Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 511-522, November.
    8. Zhaoxia Wu & Xi Xu & Mai He, 2025. "The Impact of Green Finance on Urban Carbon Emission Efficiency: Threshold Effects Based on the Stages of the Digital Economy in China," Sustainability, MDPI, vol. 17(3), pages 1-30, January.
    9. Xingcun Qin & Genglin Dong & Pengcheng Xie & Yulong Zhang & Cuiping Liao, 2024. "Impact of Green Finance on Carbon Emission Efficiency and Spatial Spillover Effects: A Case Study of Guangzhou, China," Sustainability, MDPI, vol. 16(23), pages 1-24, November.
    10. Qi He & Hongli Jiang, 2024. "Does the Energy-Consumption Permit Trading Scheme Improve Carbon Emission Performance? Evidence from a Quasi-Natural Experiment in China," Sustainability, MDPI, vol. 16(1), pages 1-27, January.
    11. Dong, Xiaotian & Wang, Kai-Hua & Tao, Ran & Sorana, Vătavu & Moldovan, Nicoleta-Claudia, 2024. "Is there a relationship between climate policy uncertainty and green finance? Evidence from bootstrap rolling window test," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 277-289.
    12. Qun He & Aijun Sun & Yu Hua, 2024. "Can Financial Agglomeration Development Reduce Carbon Emissions? Evidence from the Yangtze River Delta Region of China," Sustainability, MDPI, vol. 16(5), pages 1-22, February.
    13. Wei, Fangqing & Peng, Fei & Liu, Mengyue & Jiang, Ruixue, 2024. "Carbon productivity growth in China's thermal power industry: Empirical evidence using a bootstrapped Malmquist-Luenberger productivity index approach with fixed-sum undesirable outputs," Energy, Elsevier, vol. 304(C).
    14. Shaolong Zeng & Qinyi Fu & Fazli Haleem & Yang Shen & Jiedong Zhang, 2023. "Carbon-Reduction, Green Finance, and High-Quality Economic Development: A Case of China," Sustainability, MDPI, vol. 15(18), pages 1-22, September.
    15. Li, He & Lu, Juan, 2023. "Can low-carbon mergers and acquisitions reduce carbon emissions? Evidence from China's energy companies," Energy, Elsevier, vol. 283(C).
    16. Li, Tianyu & Yue, Xiao-Guang & Qin, Meng & Norena-Chavez, Diego, 2024. "Towards Paris Climate Agreement goals: The essential role of green finance and green technology," Energy Economics, Elsevier, vol. 129(C).
    17. Zhao, Jing, 2024. "Impact of green finance on low-carbon transformation: Spatial spillover effects in China," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    18. Kaihua Wang, 2024. "Economic policy uncertainty and green finance: evidence from frequency and quantile aspects," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-26, February.

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    More about this item

    Keywords

    Green finance; Carbon emissions; Industrial structure; Energy consumption structure;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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