Research on the carbon emission reduction effects of green finance in the context of environment regulations

Abstract

The rise in carbon emissions has significantly aggravated issues related to climate change. In light of this background, there has been a strong focus on using financial methods to reduce carbon emissions. Based on panel data for China for the period 2003–2019, we examine the effects of green finance on carbon emissions and the moderating effects of environmental regulations. The results indicate that green finance development alleviates carbon emissions. Meanwhile, our findings on the effects of green finance policies suggest that the implementation of such policies will strengthen the carbon-emission reduction effects of green finance. Additionally, the impacts of green finance on carbon emissions are moderated by administration and public-oriented environmental regulations rather than market-oriented environmental regulations. As the biggest emitter of carbon emissions in the world, China should prioritise the consistent and steady development of green finance and facilitate the green finance legislation. Furthermore, China should enhance the role of market-oriented environmental regulations while considering the synergy between environmental regulations and green finance.