The impact of green finance on low carbon economic development in the context of carbon neutrality: evidence from China

The global climate crisis has become the focus of attention, and China vigorously pursues low-carbon economic development, for which the implementation of green finance is continuously enhanced, so does the development of green finance contribute to low-carbon economic development? This paper constructs a green finance and low carbon economic development index system containing several indicators, and measures them using the entropy weight method of spatio-temporal extreme difference. This paper conducts an empirical study based on the data of 30 provinces and cities from 2005 to 2020, and the results of the study find that green finance has policy incentive effect and institutional incentive effect, and can significantly and positively affect the development of low-carbon economy, and the findings still hold after endogeneity test and robustness test. The mechanism test shows that green finance can influence low-carbon economic development by promoting industrial structure upgrading, green technology innovation and FDI inflow; moreover, the positive promotion effect of green finance is more obvious in the western region and non-Yangtze River Economic Zone region; finally, the moderating effect test reveals that the institutional environment and the level of technology market development can enhance the relationship between green finance and low-carbon economic development.