How Does Digital Finance Affect Carbon Emissions? Evidence from an Emerging Market

Hui Zhao,Desheng Liu,Ning Li,Hui Li,Yaru Yang

doi:10.3390/su132112303

Abstract

The existing literature finds that finance has a significant impact on carbon emissions, but there is a lack of theoretical explanation on whether and how digital finance, an important new financial form, affects carbon emissions. This paper uses balanced panel data at the provincial level in China from 2011 to 2018 as a sample to empirically test the relationship between digital finance and carbon emissions and introduces three exogenous events to test the impact of policy shocks. The results show that digital finance has a significant inhibitory effect on carbon emissions; the implementation of the policies of ‘G20 High-Level Principles for Digital Financial Inclusion’, ‘Environmental Protection Tax Law of the People’s Republic of China’, and ‘Interim measures for the management of greenhouse gas voluntary emission reduction’ strengthens the suppression of carbon emissions by digital finance, and the robustness test also supports the protection of digital finance. The research conclusions of this article provide theoretical evidence for understanding the relationship between digital finance and other new financial formats and carbon emissions and provide an empirical basis for policy-makers to promote the development of digital finance to reduce carbon emissions.

Highlights

Accepted: 5 November 2021Population expansion and the continuous increase in energy demand increase environmental damage [1]
Based on the actual situation, this paper introduces the scale of financial development, regional GDP, intellectual property protection, and industrial structure factors into the model and establishes the following panel model: lnCO2 = ai + b1 lnPKU − DFIIC(a, b, c)it + b2 lnControlsit + μi + θi + e where CO2it represents the CO2 emissions of province i in China in year t, and PKUDFIIC(a,b,c) is the digital financial inclusive index compiled by Peking University, with a total of three values
The estimated coefficient of the usage depth of digital finance on carbon emissions is significantly negative at a significance level of 1%, and carbon emissions are reduced by 0.8272% for every 1%

Summary

Introduction

Accepted: 5 November 2021Population expansion and the continuous increase in energy demand increase environmental damage [1]. The fifth assessment report released by the IPCC pointed out that one of the most important reasons for the greenhouse effect is that the emission of a large number of carbon compounds generated by human activities in the past two centuries has led to the concentration of greenhouse gases such as carbon dioxide in the atmosphere rising sharply [2,3]. The world CO2 emissions by sector data released by IEA show that the CO2 emissions of electricity and heat producers, transport, and industry account for a large proportion and the overall trend is increasing; data from the Statistical Review of World Energy released by BP show that global carbon emissions have increased by approximately 5 billion tons in the past ten years, of which carbon dioxide emissions in the entirety of the Asia Pacific are significantly higher than those in other regions (relevant data and charts can be requested from the corresponding author).

Objectives

Results

Conclusion