Decarbonization like China: How does green finance reform and innovation enhance carbon emission efficiency?

Green financial reform is instrumental in realizing the "dual-carbon" target. The financial sector plays a pivotal role in resource mobilization, bolstering the real economy, and facilitating the advancement of low-carbon urban development. In this study, the green finance reform and innovation pilot zone (GFRIP) is conceptualized as a quasi-natural experiment. Utilizing the difference-in-differences (DID) method, we evaluate the impact and underlying mechanisms of the GFRIP policy on the carbon emission efficiency of Chinese cities from 2006 to 2020. The results indicate that the initiation of GFRIP markedly enhances carbon emission efficiency, exhibiting a sustained dynamic effect. The mechanism analysis reveals that fostering green innovation, broadening financial supply, optimizing industrial structures, and improving energy efficiency are pivotal intermediaries through which the pilot policy enhances carbon emission efficiency. Moreover, the GFRIP effect on carbon emission efficiency exhibits significant heterogeneity, particularly in cities with smaller populations, less advanced industrial structures, lower levels of green technology, higher degrees of financial development, and limited access to green finance. Our findings offer critical insights into how green finance reforms can facilitate green and low-carbon socio-economic advancement and contribute to the achievement of the "dual-carbon" goals.