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Can Financial Development Curb Carbon Emissions? Empirical Test Based on Spatial Perspective

Author

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  • Xueyang Liu

    (Research Center of Financial Engineering, Southeast University, Nanjing 211189, China)

  • Xiaoxing Liu

    (Research Center of Financial Engineering, Southeast University, Nanjing 211189, China
    School of Economics and Management, Southeast University, Nanjing 211189, China)

Abstract

To respond to global climate change and achieve a “carbon peak” and “carbon neutrality” as soon as possible has become a common goal around the world. Economic growth relies heavily on financial development; indeed, low-carbon economic development is inseparable from financial support. This paper studies the impact of financial development on carbon emission intensity and its mechanism from both theoretical and empirical aspects. Based on the 2005–2018 data on Chinese cities and the Spatial Durbin Model (SDM) research results, this paper finds that: (1) Financial development has significantly reduced China’s carbon emission intensity overall. After considering spatial effects, financial development increases local carbon emission intensity, although it may lead to a more significant decrease in the surrounding area. (2) The analysis of heterogeneity shows that only the financial development in the eastern region has a substantial detrimental impact on total carbon emission intensity and the carbon emission intensity of neighboring cities. The financial development in the central and western regions has no significant effect on carbon emission intensity. (3) The mechanism test shows that financial development mainly reduces carbon emission intensity through technological innovation and structural optimization, with the effect of technological innovation being 9.5%, and the effect of structural optimization being 12.15%. The expansion of the consumption effects of financial development has no significant impact on carbon emission intensity. Accordingly, this article believes that it is necessary to further support financial development, build large-scale financial centers, continue to optimize the structure of financial products, and encourage the development of green finance.

Suggested Citation

  • Xueyang Liu & Xiaoxing Liu, 2021. "Can Financial Development Curb Carbon Emissions? Empirical Test Based on Spatial Perspective," Sustainability, MDPI, vol. 13(21), pages 1-19, October.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:21:p:11912-:d:666711
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    Cited by:

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    2. Qiong Chen & Hongyu Zhang & Yui-Yip Lau & Tianni Wang & Wen Wang & Guangsheng Zhang, 2023. "Climate Change, Carbon Peaks, and Carbon Neutralization: A Bibliometric Study from 2006 to 2023," Sustainability, MDPI, vol. 15(7), pages 1-12, March.
    3. Jing Sun & Ningning Zhai & Jichao Miao & Huaping Sun, 2022. "Can Green Finance Effectively Promote the Carbon Emission Reduction in “Local-Neighborhood” Areas?—Empirical Evidence from China," Agriculture, MDPI, vol. 12(10), pages 1-13, September.
    4. Ngo, Thanh & Trinh, Hai Hong & Haouas, Ilham & Ullah, Subhan, 2022. "Examining the bidirectional nexus between financial development and green growth: International evidence through the roles of human capital and education expenditure," Resources Policy, Elsevier, vol. 79(C).
    5. Sharma, Gagan Deep & Verma, Mahesh & Shahbaz, Muhammad & Gupta, Mansi & Chopra, Ritika, 2022. "Transitioning green finance from theory to practice for renewable energy development," Renewable Energy, Elsevier, vol. 195(C), pages 554-565.

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