Effect of Green Finance on Reducing CO ₂ Emissions Associated with the Building Sector in China

The building sector is one of the major energy end-use sectors. Promoting the green transformation of the building stock via green finance is critical for China to achieve its carbon peaks and neutrality goals. This study proposes a system dynamic model framework to evaluate and project the long-term impact of green finance on CO2 emissions associated with the building sector. This model explains and simulates the dynamic coupling between the evolution of various urban building stocks and supports from multiple green financial instruments. Notable findings are threefold. (1) Fiscal subsidy has greater effects on the development of green residential buildings, while green credit has higher effects on the development of green public buildings. (2) The reduction in building-related CO2 emissions by the implementation of green finance will reach the highest level from 2030 to 2040. (3) Under the implementation of green finance, public buildings exhibit the greatest potential for CO2 emissions reduction. The proposed model framework would provide insights for designing targeted green finance products and policies for green buildings.