Digital finance policy and the challenge of air pollution in China

Abstract

Abstract This study investigates the influence of digital finance tools on air quality in China from 1990 to 2020 using the cross-sectional augmented autoregressive distributed lag approach. The findings underscore the critical role of digital finance, especially internet banking, in reducing air pollution levels. The increased adoption of internet banking is linked to lower vehicular emissions and more efficient financial operations, aiding environmental preservation. Similarly, ATM banking is found to negatively correlate with air pollution, though to a lesser extent. In contrast, coal consumption, urban population growth, and inflation are positively associated with air pollution, highlighting the necessity for sustainable urban planning and energy transition policies. To combat air pollution, it is essential to utilize digital finance tools, broaden digitalization across various sectors, and employ AI and big data for precise interventions. Supporting green financial tools can help fund renewable energy projects, speeding up China’s shift to a low-carbon economy and mitigating the harmful effects of air pollution.