Does digital finance development affect carbon emission intensity: Evidence from China

Abstract

To achieve a green economic transformation, it is crucial to reduce carbon emission intensity (CEI), and digital finance has the potential to contribute to this objective. However, the specific impact of digital finance on CEI has not been thoroughly investigated. This study utilizes Chinese provincial data from 2011 to 2019 to examine the effect of digital finance on CEI using various analytical approaches, including a two-way fixed-effect model, instrumental variable method, and mediating-effect model. The findings of the study are as follows: (1) Digital finance has a significant and positive effect in reducing CEI, and this has proven to be consistent across robustness tests and adjustments for potential endogeneity. (2) The usage depth and digitization of digital finance play a significant role in reducing CEI. (3) The impact of digital finance on CEI varies across regions and over time. (4) Digital finance influences CEI by reducing energy intensity and altering energy consumption patterns. This study provides valuable insights for policy-makers in terms of enhancing their understanding of the relationship between digital finance and CEI. Consequently, it can guide the formulation of effective policies for carbon reduction and the development of digital finance in the future.