The role of financial development in the process of climate change: Evidence from different panel models in China

Özet

This paper selects the annual panel data of China and its provinces from 1997 to 2015 and explores the impactsof financial development on CO2 emissions based on the extended STIRPAT model. In order to analyze theimpacts of financial development on CO2 emissions under different levels of financial development, full-samplepanels and sub-panels were estimated. The estimation results show that financial development efficiency andstock trading volume have positive impacts on CO2 emissions, while financial development scale and the marketvalue of listed companies have negative impacts on CO2 emissions. The elasticity coefficients of the financialdevelopment variables are different for different sub-panels with different financial development. In addition,we do robustness tests by estimating the panel data model of four different sub-panels, which estimation resultsare consistent with the previous regression results. Finally, we suggest China's policy makers the following policyimplications: China's government should formulate and improve financial credit policies, which can encouragefinancial institutions to carry out green credit business. Laws and regulations of stock markets should match theenvironmental protection and carbon emission reduction. China's government should formulate and implementfiscal and taxation policies to encourage enterprises to prevent high energy consumption and carbon emission,especially non-stated owned enterprises and small size enterprises. Moreover, China should gradually developthe domestic carbon finance market and carbon trading market, which can promote carbon emission reductionand doesn't require additional subsidy from the government.