Green credits, Green securities, and Environmental Quality : A Comparative Analysis across Chinese Provinces

This paper analyzes the effects of green credits, green securities on environmental quality in a multivariate EKC framework across Chinese provinces during the 1992Q1-2020Q4 period. In this comparative analysis, we employ the DOLS and FMOLS estimators along with the method of moments-quantile regression (MM-QR) with the fixed-effects model. First, the results of the FMOLS and DOLS methods show that short-term green credits (i.e., short-term loans, STLs) and green securities (i.e., green market capitalization, CAPs) reduce carbon emissions (CE) in Chinese provinces. Unlike the Western region, long-term green credits (i.e., long-term loans, LTLs) improve environmental quality by decreasing carbon emissions in the Eastern and Central regions of China. Second, we find that high levels of STLs and CAPs (large STLs and large CAPs) have greater effects on CE than their low levels (small STLs and small CAPs), whereas small LTLs substantially lower CE, unlike the positive effect of large LTLs in all provinces. Third, the MM-QR estimator indicates that STLs and CAPs increase CE only in the most polluting provinces (i.e., at the 90th quantile) located in the central and western regions, respectively, but LTLs improve environmental quality only at the 70th, 80th, and 90th quantiles of CE in all Chinese provinces. Fourth, although renewable energy consumption inhibits carbon emissions in all provinces, oil prices, urbanization, trade openness, and foreign direct investments have heterogeneous effects on carbon emissions in these Chinese provinces across the quantiles. Finally, our findings validate the EKC hypothesis only in the Eastern and Central regions. Based on these findings, we propose some policy implications for sustainable development in China