Greener Together or Carbon Leakage? What Regional Effect Can Green Credit Policy Bring

Abstract

ABSTRACT Motivated by global environmental challenges, China introduced a green credit policy to achieve carbon peaking and carbon neutrality goals. This study examines the regional effects of the green credit policy using a difference‐in‐differences model. The results reveal significant local and regional carbon emissions reduction effects, along with negative outcomes for exports. The mediating analysis reveals that green credit policy drives regional decarbonisation by fostering green innovation. The internal firm characteristics (geographic location and ownership) and the external environment (financial technology development and government service capability) significantly moderate the policy’s impact. Additionally, the green credit policy has local and regional employment reduction effects. Green innovations mediate the reduction in employment, whereas a shift in labour from SOEs to low‐pollution nonSOEs occurs.

Keywords

• carbon leakage
• carbon reduction
• China
• green credit policy
• green technology innovation