Abstract The contemporary world is facing significant pressure to transition towards a low-carbon economy. As a key mechanism for driving sustainable economic transformation, green finance (GF) has exerted a demonstrably significant influence on carbon emission efficiency (CEE). However, systematic evidence on its impact pathways and spatial spillover effects remains insufficient, particularly in the context of developing economies. To address this gap, this study uses data from Chinese prefecture-level cities from 2005 to 2021 and applies panel fixed effects and spatial Durbin models to assess the impact and response mechanism of GF on CEE. The relevant results are four-fold. (1) GF significantly improves CEE; (2) green technological innovation and industrial structure rationalization are the two mechanisms through which GF affects CEE, verifying the Porter hypothesis and the industries agglomeration effect; (3) heterogeneity analysis reveals that cities in the eastern region, non-resource-based cities and cities with strong environmental regulations benefit more from GF; and (4) the spatial measurement results indicate that neighbouring regions receive a positive spillover effect from GF, improving CEE. This study evaluates GF in terms of quality and efficiency from a novel perspective to promote the achievement of environmental goals.
Li et al. (Thu,) studied this question.