Assessing local government responses to green credit policies and their impact on urban carbon emissions in China

The efficacy of green credit policies is contingent less on their scale than on the quality of their implementation by local governments. Departing from conventional scale-based analyses, this study constructs a novel indicator for the intensity of local government policy responses to disentangle the independent effect of implementation quality on carbon abatement in China. Employing a panel dataset of Chinese provinces and municipalities, we utilize fixed-effects, System-GMM, and spatial econometric models. Our analysis yields three core findings. First, a proactive policy response at the provincial level significantly reduces carbon intensity, a finding that proves robust across a comprehensive suite of sensitivity analyses. Conversely, municipal-level responses are largely ineffective, pointing to a significant “implementation gap” within China's multi-level governance structure. Second, the policy's impact is spatiotemporally heterogeneous; its effectiveness emerges only after the 2012 national Green Credit Guidelines, and it generates positive spatial spillovers. Third, our moderation analysis reveals that the policy's abatement effect is significantly attenuated in regions with high coal dependency, confirming that carbon-intensive path dependence constitutes a formidable barrier. To diagnose the sources of this municipal-level inefficacy, we employ cluster analysis to classify cities into four distinct typologies, each facing unique implementation challenges. These findings underscore that enhancing green finance efficacy necessitates a fundamental shift from a “one-size-fits-all” framework toward interventions tailored to local governance capacity and economic context. • A novel indicator is constructed to measure the quality of local government policy response. • Provincial government response significantly reduces carbon emissions, robust to endogeneity. • An “implementation gap” is identified: municipal responses are largely ineffective. • Policy effectiveness is weakened by coal dependency but enhanced by spatial spillovers. • City typologies are identified via cluster analysis to enable targeted policy design.