Can digital financial inclusion affect CO2 emissions of China at the prefecture level? Evidence from a spatial econometric approach

This study adopts a spatial econometric model to explore the impact of digital financial inclusion on CO2 emissions covering 284 prefecture-level cities in China. The results demonstrate that digital financial inclusion positively impacts CO2 emissions of local cities, but negatively impacts neighboring cities. In addition, we analyze the effect of the three dimensions of digital financial inclusion on urban CO2 emissions, suggesting that the breadth of coverage and depth of use significantly correlates with CO2 emissions. Specifically, the direct effect of digital financial inclusion is significantly positive in China of the eastern, western and northeastern cities. By analyzing the mediation impact mechanism, we confirm that digital financial inclusion have an influence on city-level CO2 emissions through industrial structure and economic growth, respectively. Overall, these findings help in the evaluation of the social benefits of digital financial inclusion policies and in effectively addressing environmental problems.