The synergistic carbon emission reduction advantage of green finance and digital finance

Financial development is a key factor influencing the achievement of "dual-carbon" goals, and the financial sector is undergoing simultaneous green and digital transformations, driven by digital technologies and the need for green development. Elucidating the impacts of these transformational trends on environmental performance is critical for green and low-carbon development. However, the environmental impacts of synergistic greening and digital transformation of the financial sector have not been fully explored, which hinders the formulation of financial support policies for low-carbon development. To address this research gap, this study assesses and compares the different impacts and mechanisms of digital finance (DF), green finance (GF) and green digital finance (GDF) on carbon emissions using moderating effects and simultaneous equations models, highlighting the carbon reduction advantages of GDF. Specifically, the empirical evidence suggests that (1) DF leads to an increase in urban carbon emissions, whereas GF and GDF have the opposite effect of reducing them. (2) GDF emerges as a more accessible and environmentally beneficial alternative than DF and GF. It can help relevant cities reduce carbon emissions by influencing investment scale and pushing green innovation. (3) The mitigation advantages of GDF are more pronounced in cities with higher levels of information technology specialization and financial specialization, stronger financial regulation, and lower environmental protection, economic and climate policy uncertainty. These results demonstrate the significance of developing complementary financial transition strategies to establish a competitive edge in reducing carbon emissions.