Does green finance drive low-carbon economic development? Evidence from China

Abstract

Green finance is a vital foundation for fundamental economic low-carbon transformation. Therefore, this study examines the effect of green finance on low-carbon economic development by applying various panel estimators including panel threshold model using data set of 30 provincial administrations in China during 2008–2020. The statistical results suggest that green finance significantly stimulates low-carbon economic development based on a carbon emission and emission intensity perspective. Green finance is more effective in promoting low-carbon economic development in the mid-western areas than in the eastern areas, while it is more effective in less economically developed areas than economically developed areas. Green finance is primarily responsible for driving low-carbon economic development, which is accomplished mainly by stimulating industrial structure upgrading and science and technology investment scale. The threshold outcome reveals that when green finance levels cross a certain threshold, their contribution to low-carbon economic development decreases. These findings offer valuable policy implications.