Green finance and innovation input: the promoters of carbon neutrality in China

The purpose of this paper is to examine whether green finance and innovation are the drivers of carbon neutrality in China. In this study, a time-varying parametric vector autoregressive model with a stochastic fluctuation term is used to fully examine the evolving relationships among green finance, inputs for innovation, and the process of achieving carbon neutrality. The findings from the empirical research indicate that the advancement of green finance provides a consistent and enduring benefit to the ongoing process of carbon neutralization, while increasing innovation input can also achieve this positive contribution, but the impact is not as strong and sustainable as that of green finance. Moreover, in addition to the direct effects mentioned above, the results of this paper also demonstrate the positive contribution of increased innovative inputs to the development of green finance, and the tendency of this effect to expand in the future as time progresses. Against the backdrop of climate change, which poses a serious challenge to global development, the findings of this paper provide some practical insights into how China can achieve its carbon neutrality goal through the development of green finance and increased investment in innovation.