Green Public Finance and “Dual Control” of Carbon Emissions: New Evidence from China

Abstract

In response to the escalating global climate change, countries are progressively adopting green public finance as a crucial instrument for achieving carbon neutrality. This study considers energy conservation and emission reduction (ECER) in demonstration cities’ construction as a natural experiment and verifies the effect of green public finance on total carbon emissions (TCEs) and carbon emission intensity (CEI) by using a difference-in-differences (DID) model with the help of the panel data of 276 Chinese cities from 2006 to 2019. The empirical results indicate that (1) the ECER policy effectively reduces CEs in the demonstration cities, resulting in a reduction of TCEs by 13.13% and CEI by 12.90%; (2) the ECER policy can help optimize energy structure, accelerate green technology innovation, and improve energy efficiency, thus promoting “dual control” of CEs; and (3) the CE reduction effect of the ECER policy is stronger in western cities, southern cities, lower-administrative-level cities, and cities with weaker financial strength, which has a typical “supporting the weak” effect. Based on this, we conclude that green public finance is conducive to promoting “dual control” of CEs. Our conclusions not only enrich the theoretical research on green public finance but also provide governments with empirical evidence to implement more effective green public finance policies and expedite carbon neutrality.

Keywords

• green public finance
• ECER demonstration cities
• CO₂ emissions
• dual control
• difference-in-differences