Digital finance and greener emissions: An empirical analysis of cities in China

Abstract

We match the city-level finance digitization data from the Peking University digital financial inclusion index with the industrial pollution emissions information to study the relationship between digital finance and industrial pollution emissions. After alleviating endogenous problems with our instrument variable, we found that the development of digital finance significantly mitigates industrial pollution emissions, and the coverage and depth of digital finance also have a significant impact on industrial pollution emissions mitigation. We explain the mechanism through green personal finance and individual awareness. First, green finance programs provided on Alipay encourage greener emissions. Second, digital finance directly affects individuals’ environmental awareness and daily behaviors. Our empirical results show an average of 17.3% decrease in the industrial pollution emissions caused by digital finance.