Green finance policy and environmental decoupling: evidence from China

As a policy instrument designed to promote coordinated economic growth and environmental protection in China, the Green Finance Reform and Innovation Pilot Zones (GFP) may play an important role in fostering environmental decoupling, yet their effectiveness remains unclear. This article provides new evidence on the effectiveness of China’s green finance policy by examining its effects on carbon decoupling and haze decoupling. Using balanced panel data of Chinese cities from 2012 to 2021, we employ a difference-in-differences (DID) model and find that GFP promotes carbon decoupling but has no significant effect on haze decoupling. Mechanism analysis reveals that green innovation, green bond development, and environmental regulation are important channels through which GFP promotes carbon decoupling. Further analyses show that the carbon decoupling effect is more pronounced in regions with higher levels of financial technology (Fintech) development and greater public environmental concern. Moreover, GFP also generates special spatial spillover effects, promoting carbon decoupling in neighbouring areas. These findings have important policy implications for enhancing the environmental effectiveness of China’s green finance policy.