Impact on green finance and environmental regulation on carbon emissions: evidence from China

Abstract

Introduction: Achieving peak carbon dioxide emissions and carbon neutrality is an extensive and profound systematic economic and social change. Through market-oriented financial means, green finance has moved forward the effective governance port, curbed polluting investment and promoted technological progress such as green low-carbon, energy conservation and environmental protection, which has become a powerful starting point to support the practice of low-carbon development.Methods: Based on the panel data of 30 provinces in China (except Tibet, Hongkong, Macau and Taiwan Province) from 2004 to 2021, this paper calculates the development level of green finance in China provinces by using entropy weight method, and on this basis, uses mathematical statistical model to verify the impact of green finance and its sub-dimensions on carbon emissions and the regulatory effect of heterogeneous environmental regulation tools.Results: The results show that the development of green finance has a significant inhibitory effect on carbon emissions during the investigation period, and there is a time lag effect. After a series of robustness tests and considering endogenous problems, this conclusion still holds. From the results of heterogeneity analysis, the carbon emission reduction effect of green credit is the most obvious, and the impact of green finance on carbon emission is slightly different in different regions. Besides, Command-controlled environmental regulation tools and public participation environmental regulation tools play a positive regulatory role in the transmission path of green finance’s impact on carbon emissions, but market-driven environmental regulation tools cannot effectively enhance the carbon emission reduction effect of green finance development.Discussion: The research results of this paper provide a basis for the government to formulate flexible, accurate, reasonable and appropriate green financial policies, help to strengthen the exchange and cooperation between regions in reducing carbon and fixing carbon, and actively and steadily promote China’s goal of “peak carbon dioxide emissions, carbon neutrality”.