Exploring the role of science and technology finance in carbon emissions reduction: evidence from China

Xiang Chen (), Ting An, Yanan Liu () and Jiaqi Hao
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Xiang Chen: Xi’an University of Finance and Economics
Ting An: Xi’an University of Finance and Economics
Yanan Liu: Xi’an University of Finance and Economics
Jiaqi Hao: Johns Hopkins University

Climatic Change, 2025, vol. 178, issue 8, No 17, 25 pages

Abstract: Abstract While previous studies have explored the mechanism by which science and technology finance (sci-tech finance) influences carbon emissions, they have not investigated whether capital misallocation exists within the mechanism, nor have they compared the carbon emission reduction effects of different components of sci-tech finance. This study addresses these gaps by analyzing data from 30 Chinese provinces from 2002 to 2022, employing the entropy weight method and a series of panel models. The results indicate that capital misallocation exists in the mechanism by which sci-tech finance reduces carbon emissions. Sci-tech finance tends to overly support invention-type technological progress and industrial structure upgrading, while inadequately supporting utility-type technological progress and industrial structure rationalization, leading to less effective carbon emission reductions. Decomposition analysis suggests that government-funded and stock market-funded sci-tech finance can reduce carbon emissions, whereas bank-funded and venture capital-funded sci-tech finance can not. Spatial econometric model estimations reveal that sci-tech finance can reduce the carbon emissions of neighboring provinces. Heterogeneity analysis shows that sci-tech finance is more effective in reducing carbon emissions in eastern China and provinces with high technological absorption capacity and environmental awareness. These findings provide valuable insights for the Chinese government to formulate policies that fully leverage the carbon emission reduction effect of sci-tech finance.

Keywords: Sci-tech finance; Carbon emissions; Capital misallocation; Decomposition; China (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10584-025-04002-6

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