Achieving synergy between carbon mitigation and pollution reduction: Does green finance matter?

The synergy between carbon mitigation and pollution reduction (CMPR) serves as the predominate catalyst for facilitating green transformation. Although the Green Finance Polit Policy (GFPP) shares a commitment to green development, its effectiveness in fostering the synergy of CMPR remains uncertain. Hence, we adopted the Difference-In-Difference (DID) model to investigate the effect of GFPP on the synergy between CMPR during 2009-2019. Initially, a composite synergy degree model is employed to assess the synergy between CMPR at the prefectural level. Our empirical findings demonstrate a notable contribution of GFPP in augmenting the synergy between CMPR. Robustness tests using Tobit model, PSM-DID, and placebo tests (temporal and regional) also confirm the stability of the findings. Furthermore, the study identifies three plausible mechanisms, including industry optimization, green innovation, and energy structure, which are likely to impact the aforementioned synergy. Empirical tests provide supportive evidence that substantiates the theoretical validity of these mechanisms, indicating that optimizing industry structure and enhancing the quality of green innovation can amplify the positive impact of green finance. Additionally, the impact of green finance policy in augmenting the synergy between CMPR exhibits greater prominence in central regions, non-resource-based cities, and non-key environmental protection cities. Our study also uncovers an additional finding that green finance has a detrimental effect on the quality of green innovation, thereby impeding the advancement of synergy between CMPR. In summary, our findings offer novel insights into promoting the synergistic relationship between CMPR by means of implementing green finance policy.