Green Finance and Carbon Emissions in China: Multilevel Transmission Mechanisms and Regional Heterogeneity

Climate change is bringing unpredictable risks to human beings. Green finance will strongly promote economic transformation. Drawing on a 2006 to 2021 provincial panel and guided by a multi-channel theoretical framework, this study econometrically evaluates how green finance affects regional carbon abatement. The results show that green finance significantly promotes the total amount of carbon emissions abatement by playing the functions of resource allocation and risk management, and this conclusion passes the robustness test. The mediating effect between them mainly includes energy structure adjustment, industrial structure optimization, and technological innovation. The interaction test reveals that green finance interacts with (i) energy-structure adjustment, (ii) industrial-structure optimization, and (iii) technological innovation; these three pairwise interactions are mutually reinforcing and, through their coordinated development, jointly curbing carbon emissions. Furthermore, there is regional heterogeneity in this kind of influence. Due to the large space of industrial low-carbon transformation, this effect is more pronounced in the central and western regions. Further tests show that green finance can simultaneously reduce carbon emissions and control air pollutants, which means the significant “from pollution to carbon” synergistic effect of green finance. This study provides valuable insights into how China can promote its dual carbon goals through green financial tools from the perspective of regional heterogeneity.