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Carbon Impact of Green Monetary Policy

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  • Zhiyan Wang

Abstract

This study examined the impact of the People's Bank of China's 2018 policy incorporating green credit into the central bank collateral framework on firms' carbon emissions, with a focus on its role in incentivizing investment in green technologies. The analysis used firm‐level data on Chinese listed companies from 2014 to 2023 and employed a double machine learning approach. The results showed that the policy reduced firms' carbon emissions. Mechanism analysis showed that it lowered financing costs, enhanced green innovation, improved environmental, social, and governance performance, and strengthened firms' competitiveness, thereby contributing to carbon emission reductions. Heterogeneity analysis indicated that the carbon‐reducing effect was more pronounced among high‐tech firms, large enterprises, firms in eastern regions, and state‐owned firms. These results offer empirical evidence for improving the green finance policy framework, with implications for achieving China's dual‐carbon goals and for promoting sustainable, high‐quality development.

Suggested Citation

  • Zhiyan Wang, 2026. "Carbon Impact of Green Monetary Policy," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 34(3), pages 236-261, May.
    • Handle: RePEc:bla:chinae:v:34:y:2026:i:3:p:236-261
    DOI: 10.1111/cwe.70031
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