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Green financial policy, technological innovation, and the dynamic effects of carbon emissions

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  • Chen, Yiming
  • Chen, Weixing
  • Huang, GuanZhong

Abstract

This study evaluates the impact of China’s green finance policies on carbon emissions using a multi-period DID model. Results demonstrate a significant 20.2 % average reduction in CO₂ emissions, driven primarily by innovation-mediated pathways, with general patents explaining 79.8 % of the effect. However, a suppression effect arises as non-innovation channels temporarily offset gains. Heterogeneity analysis reveals stronger impacts in medium-emission cities, while high- and low-emission regions show limited efficacy due to structural inertia or scale constraints. The findings advocate for regionally tailored policies, enhanced R&D incentives, and integrated regulatory frameworks to align financial mechanisms with long-term decarbonization.

Suggested Citation

  • Chen, Yiming & Chen, Weixing & Huang, GuanZhong, 2025. "Green financial policy, technological innovation, and the dynamic effects of carbon emissions," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015247
    DOI: 10.1016/j.frl.2025.108270
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    Cited by:

    1. Chi, Yuanying & Iqbal, Saira & Zhang, Mengwan & Zhang, Xufeng & Saeed, Muhammad Yousaf & Farhan, Muhammad, 2025. "Nonlinear dynamics and threshold effects of green finance on carbon emissions: A complex systems analysis in the Asia-Pacific region," Chaos, Solitons & Fractals, Elsevier, vol. 200(P1).
    2. Vaishali & Divya Verma, 2026. "The Dual Dividend: An Integrative Review of Climate Finance’s Environmental and Economic Effectiveness," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 17(3), pages 634-648, March.

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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