Toward Climate Neutrality: How Can Sustainable Waste Management, Financial Development, and Green Policies Promote a Sustainable Environment in China?

ABSTRACT Recent evidence highlights China as the leading generator of waste in the Asia‐Pacific region, placing the nation under further scrutiny for environmental challenges beyond its carbon emissions profile. Although climate finance initiatives and recycling practices are recognized within SDGs 3, 6, 12, and 13 as potential strategies to curb this ecological burden, empirical studies focusing specifically on China remain limited. To address this gap, the present research delivers the first empirical assessment of both the symmetric and asymmetric impacts of waste management and financial development (FDV) on carbon emissions in China. A further contribution is the construction of a composite index for green policies, derived from three key elements—green technology, green finance, and renewable energy. The analysis also incorporates urbanization and affluence as control factors, using quarterly data spanning 1997Q1–2022Q4. Methodologically, the study employs autoregressive distributed lag (ARDL) and nonlinear ARDL (NARDL) approaches, complemented by robustness checks using long‐run estimators. The findings show that improvements in waste management exert a positive influence on climate neutrality, whereas adverse shocks prove insignificant. By contrast, financial development displays negligible effects when positive but worsens environmental outcomes when negative. The green policy index and its components support climate neutrality, while affluence and urbanization act as impediments. Causality tests further indicate both unidirectional and bidirectional relationships, underscoring the predictive power of these parameters in shaping China's pathway toward climate neutrality. Based on these results, the study outlines policy measures aimed at reinforcing the pursuit of climate neutrality.