Green innovation and carbon emission reduction: Empirical insights from spatial durbin and dynamic threshold models

Qiuhan Zhao, Liangxian Fan, Honglin Chen, Yixing Yang and Zifu Wang

International Review of Financial Analysis, 2025, vol. 101, issue C

Abstract: Addressing global climate challenges requires innovative solutions to reduce greenhouse gas emissions; however, research exploring how regional differences and spatial interactions impact the effectiveness of environmental innovation remains limited. Past research has examined green innovation and emission reduction separately, overlooking their complex geographic interdependency. This study used transaction cost theory to examine the impact of green innovation on carbon emission reduction across Chinese provinces. The findings indicate significant regional patterns in innovation effectiveness by applying spatial Durbin and dynamic threshold models based on data from China's A-share listed companies from 2015 to 2022. The findings show that green innovation significantly reduced carbon emissions while positively affecting neighboring regions. This impact varied notably across areas, with eastern provinces exhibiting the most significant effects, followed by the western and central areas. This relationship was nonlinear, influenced by government intervention, economic development, and foreign direct investment. These findings inform environmental policy by illustrating how regional factors shape innovation outcomes while proposing targeted strategies to enhance emission reductions across varying economic contexts.

Keywords: Green innovation; Carbon reduction; Spatial Durbin; Dynamic multiple threshold; Regional heterogeneity; Environmental policy (search for similar items in EconPapers)
JEL-codes: O31 Q55 Q56 R11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:101:y:2025:i:c:s1057521925000845

DOI: 10.1016/j.irfa.2025.103997

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