Exploring digital finance and decarbonisation nexus: new insight from green innovation inequality in China

Abstract

The emergence of digital finance (DF) has fundamentally transformed traditional financial models, paving the way for new opportunities to advance economic decarbonisation. However, how DF influences decarbonisation remains a subject of debate, and existing research has largely neglected the mediating role of green innovation inequality (GII) in this process. GII has caused excessive concentration and lack of mobility of innovation elements and resources, inhibiting the potential for green growth in less-developed regions. There is potential for regions to promote regional decarbonisation through alleviating GII, but this remains to be empirically examined. Based on panel data from 30 Chinese provinces spanning the period from 2011 to 2023, this paper uses the fixed-effect OLS and IV-GMM methods to examine the contributions of DF to economic decarbonisation and the role played by alleviating GII in this process. Our findings demonstrate that DF directly influences regional decarbonisation and operates through an intermediary mechanism of reducing regional GII. At the same time, we also found that the degree of market liberalisation enhances the positive effect of alleviating GII on decarbonisation. In conclusion, we highlight the critical roles of reducing inequality of green innovation and market liberalisation in the process of DF promoting a decarbonised economy.