Research on Green Finance in the Context of Dual-Carbon Strategy

Mohan Wu

School of Applied Mathematics, Shanxi University of Finance and Economics, Taiyuan City, Shanxi Province 030000

China

Keywords: Green Finance, Dual-carbon Strategy, Green Financial Instruments, Carbon Dioxide Emissions.

Abstract: As the global climate change problem gets more serious, carbon neutrality has become an important issue.

And green finance is a bridge between economy and environment. Green finance to support carbon neutrality

is the focus of current research. Therefore, this study summarizes the present application of green financial

tools from domestic research on green finance. This article shows that green financial tools primarily involve

green credit, bonds as well as taxes, which can help the dual-carbon strategy. In addition, different tools and

their combinations can help the dual-carbon strategy to a different extent and to various regions. At the

regional level, Green finance helps to reduce carbon emissions by updating and streamlining the industrial

structure., promoting energy transformation and enhancing resource utilization. At the same time, at the

enterprise level, it helps the dual-carbon strategy by raising enterprises' awareness of environmental protection,

easing financing constraints and improving productivity. However, Research on green financing to achieve

carbon neutrality and reduce emissions lags behind leading countries, unevenly distributed, and thin in

connotation, which will help future scholars' research.

1 INTRODUCTION

With the increase in carbon dioxide emissions in

recent years, extreme weather events such as extreme

heat and extreme precipitation are occurring more

frequently, which greatly impacts people's daily lives.

China has proposed a dual-carbon strategy to mitigate

extreme weather problems. It is estimated that more

than 10 billion dollars are needed to realize this policy,

90% of which needs to be provided by the capital

market centered on commercial banks (Qiao, 2024).

However, the traditional financial model, based on

the business law of unlimited environmental capacity,

is not able to sustain the supply of appropriate capital.

Traditional financial industry enterprises pollute the

environment, waste of resources, sloppy business

model, cannot achieve sustainable development, and

in the allocation of funds are often oriented to

economic efficiency. Green finance is becoming a

financial innovation in the financial sector.

Traditional financing's shortcomings can be

overcome and the capital needs of the environmental

protection industry can be met.

https://orcid.org/0009-0006-8592-4457

Green finance and dual-carbon strategies research

has been highly regarded by many scholars in recent

years. And a series of excellent research results in

various aspects have emerged, covering the

realization path of green finance to help carbon

emission reduction in the context of dual-carbon. The

concept of green finance has been reviewed by some

scholars due to the high attention given to it, its

comparison with traditional finance and its

constraints, etc., and summarized the relevant results

regarding the connotation, role, policy and

development status of green finance, etc. In this thesis,

the author will summarize the appropriate results

from the perspective of green finance.

Based on this, this paper will focus on

summarizing the influence of financial instruments

related to green finance on the dual-carbon strategy

and the ways of green finance to help carbon emission

reduction from the relevant domestic research on

green finance and systematically sorting out the

relevant research results of green finance to help

carbon emission reduction. However, Green finance

research to support carbon neutrality and carbon

emission still has some shortcomings reduction, and

102

Wu, M.

Research on Green Finance in the Context of Dual-Carbon Strategy.

DOI: 10.5220/0013207300004568

In Proceedings of the 1st International Conference on E-commerce and Artiﬁcial Intelligence (ECAI 2024), pages 102-108

ISBN: 978-989-758-726-9

further deepening research, perfecting research and

innovative research are needed.

2 THE RESEARCH LINEAGE OF

GREEN FINANCE

Green finance is crucial in promoting economic

transformation to green and low-carbon development

and realizing sustainable development by directing

the flow of funds towards protecting the environment

and sustainable development. During the period

between the end of the 20th century and the start of

the 21st century, China has not yet started the

research and practice of green finance. Relevant

research is only in the embryonic stage; some

scholars have put forward the operation mechanism

and implementation program of green management in

China's financial industry, and some have introduced

foreign research results in order to carry out academic

research and industry practice. Financial institutions

have not yet practiced green management, and there

is a lack of mechanisms for identifying, preventing

and managing environmental risks in their operations.

As illustrated in Figure 1, research on the topic of

green finance has gradually increased since 2013,

with scholars analyzing data and reviewing

investigation into the progress of green finance

development at that time (Qiao, 2024). Moreover,

other research fields have emphasized the importance

of green finance as a measure to govern the

environmental economy, which shows that the

importance attached to green finance in various

research fields has been further strengthened.

Figure 1: Histogram of 114 publications in Web of Science database under the topic of green finance, sorted by the number

of publication years (Qiao, 2024).

Green finance research has become more

comprehensive in recent years and is mainly divided

into studies that examine how green finance and its

related products affect regions and companies. These

studies are summarized in the following section.

3 COMPARATIVE ANALYSIS OF

THE EMISSION REDUCTION

EFFECT OF GREEN

FINANCIAL INSTRUMENTS

Green financial tools primarily include green credit,

bonds, taxes, etc. These tools can provide the

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Research on Green Finance in the Context of Dual-Carbon Strategy

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necessary financial support for green projects,

accelerate renewable energy development, promote

ecological protection, and other fields, promote

enterprises to strengthen environmental risk

management, and guide the optimal allocation of

social resources.

3.1 Green credit

Green credit refers to the government's environmental

economic policy to realize the goal of environmental

protection through financial regulation (Zeng, 2024).

This policy provides preferential credit support for

technological innovation, industrial structure

optimization, new energy development and other

related industries or projects based on national

policies (Wang, 2008). The following section will

organize and summarize the research results from the

perspective of fitting the above definition.

On the impact of green innovation, green credit

restricts the green innovation performance of the

industry to be more active, but the green innovation's

quality is not obvious, and the intensity of its role has

regional differences, with the strengthening of the

enforcement of regional environmental laws and the

protection of intellectual property rights. In terms of

technological innovation, green credit mainly through

R & D investment to promote the regional green

technological innovation’s level. Besides, green

utility model patents are promoted significantly by

green invention patents, but the role of green utility

model patents to promote the existence of not

significant.

At the corporate level, the green credit policy is

reflected in the impact of heavy pollution enterprises.

The implementation of this policy results in a

significant financial penalty and an inhibition of

investment, through optimizing energy structure,

promoting technological transformation, and

increasing the intensity of innovation investment to

inhibit the carbon emissions’ volume of the “two high”

enterprises. Green credit policies hinder the green

innovation of heavily polluting enterprises compared

to non-heavily polluting enterprises, and to a certain

extent promotes the transformation of enterprises that

are heavily polluting, and performs the function of

'elimination of the fittest', which is mainly reflected

in the state-owned enterprises, highly socially

responsible enterprises and enterprises with high

transparency of information, and in the non-state

enterprises, low social responsibility enterprises and

enterprises with low information transparency. It is

mainly found in state-owned enterprises, high social

responsibility enterprises and high information

transparency enterprises, but not in enterprises not

owned by the state, low social responsibility firms

and low information transparency firms.

3.2 Green Bonds

Green bond is the government, financial institutions,

industrial and commercial enterprises and other

issuers to investors issued by the creditor's debt

certificates, with legal effect, and the ultimate

investment of the funds raised for the green project in

line with the specified conditions, which is also

different from the ordinary bonds of its nature (Chai,

2023).

Compared with ordinary bonds, green attributes

can significantly reduce the credit spreads of bonds,

lower the financing costs of bond issuers, and thus

increase the level of environmental protection

investment. This effect varies significantly among

different types of green bonds, different issuers and

different regulatory authorities. Green bonds also

have higher capital gains, better liquidity and a

“reputational spillover” effect. By increasing

profitability and risk tolerance, stock liquidity is also

improved.. Its issuance can also significantly increase

enterprise value and have dynamic continuity. The

impact of an increase in enterprise value varies

depending on the geography and nature of enterprises.

The issuance of green bonds not only enables

enterprises to obtain more benefits, but also

substantially lowers the intensity of urban carbon

emissions, and the role of emission reduction is more

prominent in areas that have a higher level of

financial marketization and weaker environmental

regulations, and also improves urban green total

factor productivity.

3.3 Green taxation

Environmental taxation, or green taxation, aims to

raise funds for environmental protection through tax

policy, and strengthen the environmental protection

behavior of enterprises and individuals (Jia, 2002).

At the macro level, the increase in green tax

revenue is conducive to the growth of gross domestic

product and fixed asset investment, and can

effectively reduce the urban unemployment rate and

generate employment dividends, as well as a short-

lived role in suppressing the rise of CPI. Some

scholars divide green tax policy into “narrow” and

“broad” green tax policy. Narrow green tax policy

concerns those taxes levied for the intention of

protecting the environment and have the strongest

environmental protection function. In contrast, broad

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green tax policy refers to those taxes that have

environmental protection function but are not levied

to protect the environment. It is also pointed out that

in the context of China's slowly rising carbon

emissions, both narrow and broad eco-friendly tax

policies have significantly suppressed China's carbon

emissions, and there is an obvious path-dependent

influence on carbon emissions. When the energy

conservation and emission reduction policy is

incorporated into the evaluation system for local

governments, the inhibitory effect of the narrow-

minded green tax scheme on carbon emissions is

further strengthened, and the inhibitory effect of the

broad-minded green tax scheme on carbon emissions

begins to appear (Fu, 2008).

At the micro level, green tax policy is mainly

manifested as green tax incentives. Although the

benefits of green transformation of enterprises are

much higher than the costs, due to the long cycle,

enterprises face higher transformation costs,

including the purchase of new environmental

protection equipment, the creation of green processes,

as well as adjusting the production structure, staff

training and other aspects of the necessary

expenditures. At the same time, the return brought by

the transformation to enterprises is uncertain within a

short period of time, and the full benefits of green

transformation activities cannot be obtained, thus

hindering the normal development of enterprises. As

a result, China has introduced a variety of green tax

incentives to promote environmental protection in

recent years, giving green tax incentives to

environmentally friendly industries and green

behaviors of enterprises investing in environmental

protection projects, and the intensity of the incentives

has been increasing. And some scholars pointed out

that green tax incentives by reducing the adjustment

costs faced in the transition of the sustainable changes

in companies to play an incentive role, and the

incentive effect with The essence of ownership rights

and the regional marketization process of different

differences (Bi, 2019).

3.4 Comparative analysis of emission

reduction effect

Some scholars combine and compare different kinds

of green financial products.

For example, Jiang Hongli et al (Jiang, 2020) pointed

out that green credit and green venture capital alone

can inhibit emissions of carbon When both are

included in the same model, Green credit and green

venture capital have the same effect on carbon

emission reduction in both high and low carbon

emission groups, but there is a significant difference

in the carbon emission reduction effect of green credit

and green venture capital in the high and low green

credit group.

In the empirical investigation of You Zhiting et al

(You, 2022), overall each green financial business has

a significant impact on reducing emissions, but the

combination of green credit and green bonds shows a

negative moderating effect, and the rest of the

combination is a complementary effect. In the

regional analysis, green industrial investment in the

western region has a stronger impact on reducing

emissions, but green credit is less effective. In the

central region, green bonds do not significantly affect

regional carbon emissions, and the complementary

effect exists only between green credit and green

industrial investment. In the eastern region, the single

or interactive terms are significantly negatively

correlated with regional emissions of carbon, and the

impact of reducing emissions is optimal.

Wang et al (Leiling, 2024) analyzed different

combinations of green financial instruments and

concluded that The emission reduction effects of

green credit and green investment were significantly

higher than those of green securities and green

insurance, and the main ways of emission reduction

differed in various regions. Among them, emission

reduction in the eastern region is significantly aided

by green credit and investment, and green credit and

green insurance are the main ways of the decrease in

emissions in the central and western regions.

Li Boyang et al (Li, 2024) showed that renewable

energy development can be significantly influenced

by green credit and venture capital. Although the

upgrading of the industrial structure can be aided by

green credit and venture capital and incentivize green

technological innovation through two channels in the

development of renewable energy, but green credit on

industrial structure upgrading to promote the stronger

effect, while green venture capital has the ability to

effectively motivate green technological innovation

to improve both quality and quantity.And the

development of renewable energy can be aided by the

role of developed financial regions in the

development of green credit and green venture capital,

which are geographically different, and a high degree

of marketization in the region more significant.

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4 PATHWAYS AND IMPACTS OF

GREEN FINANCE FOR DUAL

CARBON STRATEGY

4.1 Region and industry

At the regional level, Wang Jie and Wang Jun (Wang,

2024) highlighted that the development of green

finance enhances the efficiency of local energy use,

but at the same time, it will result in a decrease in the

efficiency of energy utilization in neighboring

regions, which is not in accordance with the concept

of sustainable development. Thus, some scholars

conducted further research and found that a 46.72%

reduction in carbon emission intensity was achieved

through the establishment of pilot zones for green

financial reform and innovation at the municipal and

prefectural levels. The policy can successfully

achieve carbon emission reduction effect through the

promotion of green technological innovation and

industrial structure optimization, and green financial

reform and innovation pilot zone policy has a positive

impact on reducing carbon emissions, which is still

significantly positive under the moderating effect of

environmental regulation.

Chen Yan and Li Hao (Chen, 2024) based on

empirical analysis, concluded that green finance can

help reduce carbon emissions by utilizing advanced

industrial structures and rationalizing industrial

structures, in which the indirect carbon reduction

effect produced by green finance through the

advanced industrial structure is comparable to the

direct effect, but the indirect carbon reduction effect

produced by green finance through the rationalization

of industrial structure is comparable to the direct

effect.Green finance's indirect carbon reduction effect

can be compared to the direct effect of industrial

structure rationalization, but the indirect carbon

reduction effect of green finance through industrial

structure rationalization is much weaker than the

direct effect.

Su Xiaorong and Liu Yan (Su, 2024) discovered

that the dual-carbon strategy can be aided by the use

of green finance to reduce carbon emissions,

promoting energy transformation and enhancing

resource utilization. In terms of reducing carbon

emissions, The flow of funds can be directed towards

low-carbon industries and clean energy industries can

be promoted through green finance. Secondly, green

finance can promote the transformation and

modernizing traditional industries that produce a lot

of carbon dioxide, give financial assistance to the

application of low-carbon technologies and energy-

saving equipment, and encourage enterprises to

change their production methods, reduce the use of

resources and the emission of pollutants. In

promoting energy transformation, the rational use of

green finance can promote progress in clean energy

technology and industrial development, as well as

China's energy transformation. When it comes to

improving the utilization rate of resources, the

traditional financial system has problems such as

imprecise flow of funds and unclear investment

direction, while green finance establishes special

green funds, green credit and other mechanisms,

which makes the allocation of funds more reasonable

and focuses on resources to promote ecological

protection work.

4.2 Enterprises

The reduction of corporate carbon emissions can be

achieved through green finance by enhancing

corporate environmental awareness, as found by Xu

Yan (Xu, 2024) and others, easing financing

constraints to increase green investment and other

channels to accomplish a decrease in carbon

emissions. Meanwhile, green finance development

improves enterprises' ESG performance and

economic performance, realizing the 'win-win'

between economic growth and protecting the

environment. At the same time, the ESG scoring

system has different degrees of positive impacts on

listed companies in different industries, and the

carbon emission intensity of various types of

enterprises is affected differently by green finance.

Non-state-owned enterprises have an effect on carbon

emission intensity that is inhibited, non-heavily

polluted enterprises and high-tech enterprises is more

significant, and enterprises in first-tier cities, non-

resource cities and regions with stronger basic system

regulations can reduce carbon emission intensity

more effectively.

Wang Yulin and Zhou Yahong (Wang, 2023)

found that green financial development also has a

significant role in promoting enterprise innovation,

green financial development of state-owned

enterprises, enterprises that are in areas with better

intellectual property protection and less heavy

pollution are more significant in promoting

innovation, and green invention patent innovation can

significantly improve the financial performance and

environmental performance of enterprises.

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5 CONCLUSIONS

This paper reviews the domestic research on green

finance, specifically on the effect that green financial

instruments have on the dual-carbon strategy and

green finance to help the dual-carbon strategy in two

ways to summarize.

This paper finds that carbon emissions can be

effectively reduced through the use of green financial

tools. The integration of various tools has different

effects on carbon emission reduction, and the effects

of emission reduction vary depending on the regions

and enterprises involved. At the same time, it is found

that the main way to reduce carbon emissions is by

promoting the structural upgrading of high-carbon

industries and directing capital towards industries that

reduce carbon emissions. at the regional level. At the

enterprise level, the dual-carbon strategy is practiced

mainly through promoting enterprise innovation and

alleviating financing constraints.

The future financial development will be led by

green finance, a major innovation and change in the

financial field. At present,the field of green finance

research is still in its infancy and exploration stages,

and there are still some issues that need to be resolved.

First of all, in terms of research on green financial

products, the gap between China and foreign leaders

is still obvious. Relevant research is unevenly

distributed, mostly focusing on green bonds and

green credit, with lacking knowledge about other

green finance products, such as green securities and

green insurance. Connotation of green finance

Secondly, more research needs to be conducted on the

concept of green finance.The proposal of carbon

neutral targets and the end of domestic environmental

pollution control have made carbon finance the core

of green finance. Therefore, the center of gravity of

the connotation of green finance in the future needs

to shift to carbon finance. Finally, green finance's

realization path and product research to support

carbon neutrality need to be further innovated. In

regards to the implementation of green finance to

achieve carbon neutrality, new innovative paths can

be explored based on China's national conditions. For

example, it is necessary to explore the innovation of

financial products that are focused on reducing

carbon emissions (including carbon credit, carbon

bonds, carbon equity and carbon funds, etc.) and how

green finance can be combined with financial

technology and digital finance.

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