Green credit, environmentally induced R&D and low carbon transition: Evidence from China

Abstract

This paper explores the impact of green credit (Cre) on low-carbon transition (Lct) and its influence mechanisms. Theoretically, Cre promotes environmentally induced R&D (ER&D), which in turn affects Lct. Empirically, using a panel data of 30 Chinese provinces and cities from 2004 to 2019, we measure the provincial ER&D and carbon emission performance (Cep), based on which we conduct an econometric analysis. It is observed that Cre promotes Lct (that is, Cre reduces carbon emission and improves Cep). This conclusion still holds after a series of robustness tests and endogeneity treatments. And the impact of Cre on Lct is asymmetrical due to regional differences in physical and geoclimatic characteristics, income levels, and financing constraint levels. Second, ER&D is an important mechanism of action for Cre enhancing Lct. Further analysis reveals that ER&D can affect Lct through energy transition effects and green innovation effects. Finally, the positive effect of Cre on ER&D is significant in high level of Lct regions, but insignificant in low level of Lct regions. Based on this, specific policy recommendations from the perspective of developing Cre and establishing an incentive mechanism for ER&D are put forward.

Keywords: Carbon emission performance; ER&D; Green credit; Impact mechanisms; Low-carbon transition.