Can Green Finance Promote Regional Carbon Emission Reduction? – Empirical Evidence from 228 Cities in China

Abstract Green finance is a crucial market-driven instrument in advancing the goals of carbon neutrality and carbon peaking. Investigating its impact on regional carbon emission intensity holds significant theoretical and practical value. This study explores the impact of green finance on regional carbon emission intensity using data from 228 Chinese cities between 2012 and 2019. We develop regional indices for green finance and carbon emission intensity, applying a double fixed effect model to empirically analyze the relationship. Key findings include: 1. Green finance effectively reduces regional carbon intensity, with the result remaining robust under various robustness checks. 2. The carbon reduction effect varies by region, population density, and technological investment, being more pronounced in eastern, high-density, and tech-invested regions. 3. Green finance promotes carbon reduction through improved industrial frameworks and sustainable innovation. 4. Environmental regulation has mixed effects – its “negative offset effect” often outweighs the “positive compensatory effect,” as current financial development cannot fully support green transformations in businesses. The findings of this study not only offer new perspectives for understanding the role of green finance in sustainable development but also provide valuable empirical evidence. Furthermore, they offer useful references for further refining green finance policies and promoting low-carbon economic development.