1. Introduction
Excessive greenhouse gas emissions will lead to the superposition of various extreme climate crises, posing a serious threat to humans, economic development, food security, biodiversity, and ecosystems [
1,
2]. If global carbon emissions increase at the current rate, the global temperature may increase by 1.5 °C from 2030 to 2052 and even exceed 3–5 °C by the end of the 21st century [
3]. Reducing carbon emissions is an important strategy for dealing with the climate crisis [
4]. Various countries have also launched actions to address climate change. At present, major developed countries such as the European Union, the United States, Germany, the United Kingdom, and Japan have reached carbon peaks one after another. They have committed to carbon neutralization by 2050 in the form of political agreements, strategies, laws, and statements of intent. In 2019, China’s total carbon emissions were about four times that of the EU, twice that of the United States, and 16 times that of Germany. China’s total carbon emissions are rising and have not yet reached carbon peaks. However, China promises to achieve peak carbon emissions by 2030 and carbon neutrality by 2060. The accompanying pressure on emission reduction is greater. Therefore, China urgently needs to adopt comprehensive policies to reduce emissions.
The Solow model says that, in a perfectly competitive market, economic growth is stable, and the market can reach Pareto optimality [
5]. Most scholars believe that, when private interests and social interests are inconsistent, the market cannot achieve the Pareto optimal state, and then externalities occur [
6]. Excessive carbon emissions from human activities are a typical example of a negative external economy. These emissions threaten the safety of people and their property. Governments and other institutions must skillfully intervene in the market and formulate effective environmental policies to govern negative economic externalities [
7,
8]. Pigou proposed that measures such as taxation, formulating emission standards, levying pollution charges, and issuing pollution permits can be taken to internalize external costs to control carbon emissions [
9]. Baumol and Oates proposed establishing environmental quality standards to govern negative externalities [
10]. Marshall believes that there is an external economic effect between industries, that is, the supporting effect of one industry on another [
11]. Therefore, the external economic effects between industries can be used to control carbon emissions. Government agencies and academia have noted that the financial industry can impact on carbon emissions.
Financial support is required to achieve the two goals of “carbon peak” and “carbon neutrality” as soon as possible. Therefore, in February 2021, the State Council of China issued the Guiding Opinions on Accelerating the Establishment and Improvement of a Green Low-Carbon Circular Development Economic System, which suggested developing green credit, green direct financing, green insurance, and climate investment and financing. In March 2021, the People’s Bank of China proposed to give play to the functions of financial resource allocation, risk management, and market pricing. They will contribute to carbon peak and carbon neutrality by improving the green financial standard system, strengthening supervision and information disclosure, improving incentive and restraint mechanisms, enriching green financial products, and expanding the international green finance cooperation space. At the same time, the Ministry of Ecology and Environment of China issued the Interim Regulations on the Administration of Carbon Emission Trading (Revised Draft), proposing to establish a national carbon emission trading fund and attaching importance to the financial attributes of the carbon market. Therefore, finance will play an important role in the process of carbon emission reduction in China.
Some scholars believe that finance has increased carbon emissions by promoting production, increasing energy consumption, and promoting commodity sales [
12,
13,
14]. Some scholars believe that finance can reduce carbon emissions by promoting companies’ energy-saving technologies, controlling environmental pollution, improving environmental quality, and improving resource utilization efficiency [
15,
16]. Some scholars believe there is a nonlinear relationship between finance and regional carbon emissions [
17]. Previous studies expanded and enriched the scope of financial development affecting carbon emissions but ignored the impact of financial spatial agglomeration characteristics on regional carbon emissions.
The phenomenon of various financial entities gathering in specific regions is called financial agglomeration. Analyzing the relationship between the spatial agglomeration of economic variables and economic phenomena belongs to the new economic geography, which was created by Paul Krugman [
18]. After the development of Venables [
19], Baldwin [
20], Martin [
21], and others, this theory has become a significant advantage in analyzing the spatial characteristics and economic significance of economic activities. The existing literature has also studied the role of financial agglomeration. However, few works of literature have studied the impact of financial agglomeration on regional carbon emissions.
To make up for the shortage of existing literature, we designed the following research: First, this paper analyzes the research background, including the carbon emission status and related policies of major countries. Then, we use econometric models to analyze the direct impact, impact mechanism, heterogeneity analysis, and spatial effect of financial agglomeration on carbon emissions. Finally, we put forward relevant suggestions according to the finding. The research design of this paper makes up for the lack of existing research and has theoretical and practical significance.
The rest is organized as follows: The section on “Research background and hypotheses” reveals the carbon emission status and emission reduction policies of China and other major countries worldwide and introduces research hypotheses. The section on “Materials and methods” shows the research design of this paper. The “Imperial Results and Analysis” section reviews the impact, impact mechanism, and spatial effect of financial agglomeration on regional carbon emissions. Finally, the “Conclusion and Suggestions” part summarizes the research and provides relevant suggestions.
5. Conclusions and Suggestions
5.1. Conclusions
Controlling carbon emissions has become a global consensus. However, the existing literature rarely explores the impact of financial agglomeration on carbon emissions. Based on the analysis of the emission reduction history of major countries, this paper mainly uses the provincial-level data of China from 2002 to 2018 to study the impact, impact mechanisms, and spatial effects of financial agglomeration on regional carbon emissions. The following are the conclusions:
First, this paper analyzes the situation of carbon emissions and emission reduction policies in China and major developed countries. China lacks carbon tax policies, and there are many drawbacks in the carbon trading market; a “bottom-up” voluntary emission reduction mechanism has not been formed. Compared with other developed countries, China has a low per capita income, a low urbanization rate, a high proportion of secondary industry, and high coal consumption.
Second, we conduct research using ESDA and discover that the majority of China’s carbon-emitting provinces are located in Inner Mongolia, Shanxi, Hebei, Liaoning, Shandong, Jiangsu, and Guangdong. The region with huge financial practitioners includes Beijing, Shandong, Zhejiang, Shanghai, Guangdong, Hunan, Henan, Hebei, Liaoning, Jiangsu, and Sichuan. The total carbon emissions and financial practitioners have characteristics of spatial agglomeration.
Third, our empirical study found that financial agglomeration can reduce carbon emissions and passed a series of robustness tests. The heterogeneity analysis shows that the emission reduction effect of financial agglomeration is more significant in the central and high-carbon regions. The intermediary mechanism test found that financial agglomeration can reduce carbon emissions by reducing the secondary industry’s proportion and increasing the third industry’s proportion. The adjustment mechanism found that the emission reduction effect of financial agglomeration under carbon trading is more significant. It is worth noting that financial agglomeration can still reduce carbon emissions after considering the spatial effect. We find that financial agglomeration in regions with close economic geography will increase the region’s total carbon emissions.
5.2. Suggestions
Based on the conclusions of this paper, we propose the following suggestions.
We first propose that China develop a sensible carbon tax policy, enhance the carbon trading mechanism, recruit qualified carbon trading professionals, work toward establishing a “bottom-up” voluntary emission reduction mechanism, assume the role of financial resource allocation, and direct funds toward environmentally friendly industries.
Second, China needs to place severe limits on carbon production in high-carbon areas. To that end, we urge low-carbon areas to share their knowledge on emissions reduction with high-carbon areas. It is important to remember that high-carbon businesses should not be allowed to relocate to low-carbon regions. Meanwhile, we advocate for standardizing the spatial layout of industrial structure.
Third, financial agglomeration can reduce the proportion of the secondary industry’s proportion and increase the third industry’s proportion. Consequently, we need to encourage the green transformation and upgrading of the secondary industry and reduce capital credit to industries with high pollution, high energy consumption, and high emissions. Financial institutions should provide green credit for low-carbon environmental protection enterprises and industries.
Fourth, carbon emission trading plays an important role in the process of financial agglomeration to curb regional carbon emissions. Therefore, we should encourage carbon emissions trading, urge financial institutions to provide carbon financial derivatives transactions, establish a unified large carbon trading market in China, and promote market-oriented carbon trading.
Fifth, financial institutions should vigorously promote green credit, green financial products, and mechanism innovation. We encourage financial institutions to give play to the financial attributes of the carbon trading market, promote the innovation of carbon financial products, improve the liquidity of the carbon trading market, enrich the product portfolio, and provide hedging tools.
The main limitations of this study are: cities account for 2% of the earth’s surface, but their residents consume 75% of the world’s energy resources [
26]. Reducing emissions in cities is crucial. However, due to data availability, this paper mainly analyzes the data at the provincial level in China. In the future, we will further explore the emission reduction mechanism at the urban level.