Synergistic emission reduction effect of carbon emission trading and green finance markets: evidence from 46 Chinese cities

The global imperative to mitigate climate change requires a transition towards sustainable, low-carbon economies, with market-based mechanisms playing a pivotal role. Carbon emission trading (CET) and green finance (GF) markets have emerged as critical instruments for incentivizing emission reductions and financing sustainable transitions. However, existing research often examines these markets in isolation, leaving a significant gap in understanding their synergistic governance and combined effectiveness. This study aims to address this gap by exploring the joint carbon reduction mechanisms enabled by CET and GF market interaction. We investigate how these markets, from both market-signaling and technological-innovation perspectives, collaboratively influence emission outcomes, thereby incorporating economic, technological, and environmental sustainability dimensions into climate governance analysis. Using a systematic Generalized Method of Moments (GMM) model and panel data from 46 cities across eight pilot regions of China’s CET markets (2013–2019), this study provides robust empirical evidence on collaborative emission reduction. Findings show that both CET and GF independently suppress carbon emissions. CET operates through price signals incentivizing cost-effective abatement, while GF channels capital toward green technological innovation. Crucially, the study identifies a powerful synergy: these markets jointly foster industrial intelligent technology—enhancing energy efficiency and optimizing production processes—to support emission reduction. Moreover, environmental information disclosure positively moderates the GF-emissions relationship by reducing information asymmetry and enhancing market discipline. This research elucidates the theoretical and empirical pathways through which CET and GF interact to advance low-carbon technology and reduce emissions—a nexus previously underexplored. Achieving deep decarbonization requires well-functioning markets and policies that enhance their synergistic coupling. We recommend refining CET mechanisms to ensure robust price signals while accelerating GF market development to unlock innovation capital. Integrating industrial intelligent technology is essential to maximize joint emission reduction effects. The study provides a theoretical and empirical foundation for designing integrated policy frameworks and market mechanisms crucial for achieving carbon neutrality, highlighting the interconnectedness of financial, environmental, and technological sustainability.