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Carbon Emission Reduction Effect of China’s Financial Decentralization

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  • Fangzheng Zhu

    (Business School, Beijing Normal University, Beijing 100875, China)

  • Yuexiang Lu

    (Business School, Beijing Normal University, Beijing 100875, China)

Abstract

Due to a lack of focus on China’s financial decentralization system, the existing research does not pay attention to the beneficial contribution of Chinese local governments to carbon emission reduction through their actions in the financial field. In this study, we collected 16 years of data from 30 provinces in China and utilized a two-way fixed-effects model to empirically test the impact of China’s financial decentralization on carbon emission reduction. The regression results show that China’s financial decentralization system has a significant carbon-emission reduction effect. A heterogeneity analysis shows that this effect is common in different regions of China and that fiscal decentralization will negatively moderate it. A mechanism analysis shows that under China’s financial decentralization system, the active intervention of local governments in local finance will significantly upgrade the energy consumption structure and ease the financing constraints of enterprises. The regression results of the spatial econometric model show that the carbon emission reduction effect of China’s financial decentralization still has a spatial spillover effect. Finally, we put forward corresponding policy recommendations.

Suggested Citation

  • Fangzheng Zhu & Yuexiang Lu, 2022. "Carbon Emission Reduction Effect of China’s Financial Decentralization," Sustainability, MDPI, vol. 14(22), pages 1-22, November.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:22:p:15003-:d:971397
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