Can Digital Finance Enable China’s Industrial Carbon Unlocking under Environmental Regulatory Constraints? Joint Tests of Regression Analysis and Qualitative Comparative Analysis

Sustainable development goals challenge the carbon lock-in dilemma of the industrial economy, and identifying the motivation and mechanism behind carbon unlocking has become an urgent priority. With its inclusive and precise advantages, digital finance (DF) provides a new impetus for the economy’s low-carbon transformation, while reasonable environmental regulation (ER) acts as an important guiding constraint. We focus on the carbon unlocking performance of DF under ER constraints. After constructing and calculating the industrial carbon unlocking efficiency (ICUE), we observe the trends of ICUE fluctuating positively, clustering towards the eastern region, and polarization. Subsequently, based on theoretical analyses, we explore the marginal and configuration effects of DF and ER in improving ICUE using panel data from 30 Chinese provinces between 2011 and 2021 and adopt a mixed research method with regression analysis (Tobit hierarchical regression and quantile regression for panel data (QRPD)) and dynamic fuzzy-set qualitative comparative analysis (fsQCA). The regression analysis results show that DF can notably enhance China’s provincial ICUE, with ER generally serving as a positive moderator; however, the unlocking potential of informal environmental regulations needs further exploration. As ICUE improves in a specific location or time, the positive contribution of DF to ICUE also increases, whereas the moderating effect of ER exhibits an optimal range and follows an inverted U-shape. The dynamic fsQCA results support the findings of the regression analysis and further emphasize that effective cooperation between DF and ER is crucial for high ICUE, while inadequate DF support and the absence of formal environmental regulations remain bottlenecks in industrial carbon lock-in. Moreover, configuration paths demonstrate clear path dependency in both time and space, indicating a prolonged unlocking endeavor.