The Impact of Green Finance Reform and Innovation Pilot Zones on Urban Carbon Emission Intensity: Evidence from a Difference-in-Differences Approach

Cities must cut carbon emissions per unit of output to meet the dual carbon goals, and green finance is expected to help. We study China's Green Finance Reform and Innovation Pilot Zones, launched in 2017, using a panel of 287 prefecture-level cities over 2013-2022. A difference-in-differences design with two-way fixed effects shows that treated cities lowered carbon emission intensity by about 12% relative to untreated ones, with larger reductions in later years. Two mechanisms drive this outcome: credit expands and becomes more available to low-carbon projects, and industry upgrades toward greener production instead of contracting. The effect appears almost exclusively where local financial systems are relatively developed. These results offer city-level causal evidence on green finance and argue for tailoring future reform to local financial conditions.