Provincial Carbon Inequality and the Effectiveness of Green Finance Development in China

Development disparities within regions cause carbon inequality (CI), which exacerbates the Chinese unbalanced development problem. However, there is still a lack of research that measures CI from the aspect of intra‐regional differences and examines its impact factors. Using sub‐provincial data covering 420 cities, counties, and districts, this study measures CI in 30 Chinese provinces and investigates the influence of green finance (GF) on CI and the role of climate risk (CR) in the GF‐CI linkage. Several findings have been found. First, using the population‐weighted Williamson index to capture intra‐provincial disparities, our analysis reveals pronounced regional variation in CI, with the East and Middle regions following a U‐shaped pattern between 2008 and 2017, while the West experiences a consistent decline. Second, the dynamic panel analysis reveals that GF can reduce CI, particularly in midwestern regions and provinces characterised by lower carbon intensity. Third, the moderating effect demonstrates that climate risk (CR) weakens the inhibitory role of GF on CI. Under low CR, GF mitigates CI, whereas when CR exceeds a critical threshold, the beneficial effect of GF is reversed. This study contributes empirical insights for policymakers seeking to mitigate CI through financial instruments.