How does green finance affect the low-carbon economy? Capital allocation, green technology innovation and industry structure perspectives

• Published in: Economic research - Ekonomska istraživanja Vol. 36; no. 2
• Main Authors: Zhu, Yue, Zhang, Juntao, Duan, Caiquan
• Format: Journal Article Paper
• Language: English
• Published: Pula Routledge 10.07.2023; Taylor & Francis Ltd; Taylor and Francis Group i Sveučilište Jurja Dobrile u Puli, Fakultet ekonomije i turizma Dr. Mijo Mirković
• Subjects: Capital; Carbon; Clean technology; dynamic threshold model; Economic theory; Finance; Green finance; green technology innovation; Industrial structure; Innovations; low-carbon economy; Panel data; spatial effect decomposition; Spillover effect; Technology; Transformation
• ISSN: 1331-677X; 1848-9664
• DOI: 10.1080/1331677X.2022.2110138

The development of green finance and social low-carbon transformation is an essential concern for academia and industry. Based on Chinese provincial panel data spanning the period 2005-2019, we introduce the Cobb-Douglas production function and spatial Durbin and dynamic panel threshold models to deeply analyse the impact of green finance on the low-carbon economy. The mechanism test demonstrates that the scale, technique, and structural effects of green finance play a significant role in the low-carbon economy: they correct capital mismatch, promote green technology innovation, and optimise industrial structure. Meanwhile, green finance not only promotes the local low-carbon economy construction process, but also generates spatial spillover effects on neighbouring regions; however, there is regional heterogeneity in the impact of the transmission mechanism. Furthermore, only when capital mismatch is severe, and the low-end industrial structure poor is the positive impact of green finance on the low-carbon economy highlighted based on scale and structural effects; the ability of green finance to contribute to the low-carbon economy through the technique effect has been more stable and significant. This emphasises that green technology innovation is key to supporting low-carbon development in the long run.