The synergistic effects of financial development and industrial structure on urban decarbonization

This paper examines the role of financial development in shaping the environmental outcomes of industrial structural upgrading in Chinese cities. Drawing on panel data from 295 prefecture-level cities between 2013 and 2023, the study focuses on the decarbonization implications of high-tech industry expansion and service-sector growth. Employing two-way fixed effects models with interaction terms, supported by random effects and instrumental variable estimations for robustness, the results reveal distinct patterns. Newly established high-tech enterprises initially increase emissions, yet their long-term contribution to decarbonization improves significantly in cities with more advanced financial systems. In contrast, the cumulative agglomeration of high-tech firms and the expansion of the tertiary sector are consistently linked to reductions in carbon dioxide emissions. The findings underscore the critical moderating role of both traditional and digital finance, which amplify the pollution-mitigating effects of structural transformation. By highlighting the institutional conditions that enable green structural change, this study provides new insights into how financial infrastructure can facilitate urban decarbonization in emerging economies.