Financial Inclusion and Carbon Reduction: Evidence From Chinese Counties

Abstract

With the improvement of inclusive financial system, China’s economy has made significant development and growth. It worth in-depth investigation on environmental impact of financial inclusion, since growing GDP usually accompanied by more intensive carbon emission. This paper aims to reveal whether financial inclusion contributes to the carbon reduction in China using county-level dataset. A fixed-effect panel regression approach is adopted to examine the impact of financial inclusion on county-level regional carbon emissions. The estimation results imply that financial inclusion plays an important role in reducing carbon emissions. The mediation effect analysis reveals two channels through which financial inclusion imposes negative impact on the level of regional carbon emissions. One is to elevate the carbon sequestration capacity by increasing vegetation coverage, and the other is to improve the industrial structure through enhanced financial support. In addition to being a bridge between economic opportunity and output, financial inclusion can also act as an effective measure for addressing climate change.

New insight into decoupling carbon emissions from economic growth: Do financialization, human capital, and energy security risk matter?

“…This finding agrees with that of Acheampong (2019) and Iorember et al (2020). Conversely, the works of Jiakui et al (2023) and Yang et al (2022) point to the reduced impact of FD on carbon emissions. Conversely, HC remains negative and significant at the 5% level, both in the short and long run.…”

“…Earlier, although Frankel and Romer (1999) had identified foreign direct investment as a crucial channel of financialization to growth, Haber et al (2020) rather considered the stock and equities market as the two prominent channels of this transmission process. Yet another strand of scholars found that financialization rather reduces the rate of CO 2 emissions (Jiakui et al, 2023; Sheraz et al, 2021; Yang et al, 2022). Such studies appear to provide empirical evidence that given its potential moderating role, expansion in financial access and financial infrastructure would facilitate the procurement of renewable or cleaner energy production technologies, which may in turn reduce CO 2 emission.…”

“…For instance, although higher income countries with better financial strength have shown to have exhibited stronger decoupling statuses (Haber et al, 2020; Hu et al, 2020), there appears to be a high tendency for weak decoupling among middle‐ and lower income countries. The exact impact of financialization on decoupling CO 2 emissions, however, remains an inconclusive debate; a group of studies point to its devastating impact (Iorember et al, 2020; Yang et al, 2022), whereas another strand of scholars have found its ability to reduce environmental damage (Jiakui et al, 2023; Sheraz et al, 2021).…”

Spatial Effect of Economic Growth Targets on CO2 Emissions: Evidence From Prefectural-Level Cities in China

“…Using an econometric model, Chen et al (2020) show that political globalization reduces CO 2 emissions, and You and Lv (2018) report that economic globalization has a significant negative impact. Farouq et al (2021) argue that financial globalization uncertainty is inversely related to CO 2 emissions, and enhancing the financial market can reduce carbon emissions by improving carbon sequestration capacity and industrial structure (Yang et al, 2022). Many scholars evaluate the environmental Kuznets curve hypothesis by analyzing whether there is an inverted U-shaped relationship between economic growth and carbon emissions.…”

Does financial inclusion spur carbon emissions in India: an ARDL approach

“…Using number of ATMs and insurance policy as a key interest variable and employing the ARDL model study found that an increase in number of ATMs and total insurance enhances the renewable energy consumption and CO 2 emission in China province. Consequently, using the country-level data set of China Yang et al (2022) explored the relationship between financial inclusion and carbon emission. Using panel data Carbon emissions in India methodology, study explored the negative association between financial inclusion and regional level carbon emission in China.…”