The effect of green credit policy on carbon emissions based on China’s provincial panel data

Abstract

Abstract The attainment of “carbon peaking” and “carbon neutrality” is of utmost significance for the optimal progress of China’s economy. As the main channel for green finance, the carbon reduction effectiveness of green credit policy is worth discussing. This article constructs an analytical framework for green credit, carbon emissions and technological advancement. Based on panel data from 30 provincial administrative regions in China from 2012 to 2021, this article uses the mediation effect model and the Spatial Durbin Model to investigate the transmission mechanism and spatial spillover effect of green credit policies on carbon emissions. According to baseline regression model results, our study revealed that overall, carbon emissions were reduced by green credit. The spatial spillover effect of green credit on carbon emissions points to the interconnectedness of different regions in terms of environmental impact. The significant negative indirect effect indicates that the increase of local green credit also has a significant inhibitory effect on surrounding carbon dioxide emissions. It suggests that efforts to reduce carbon emissions in one area can have positive consequences for neighboring regions as well. Green credit is able to reduce carbon emissions indirectly via technological advancement, according to the mechanism testing mediation effect model. This paper presents policy recommendations for relevant departments.

Keywords

• Green credit policy
• Carbon emissions reduction
• Spatial econometric model
• Green finance
• SDM model