The Impact of Green Finance on Agricultural Carbon Emission Reduction: Empirical Evidence from China

Abstract

Understanding how green finance (GF) affects agricultural carbon emissions (ACE) is essential for advancing agricultural green transformation. This study utilizes panel data from 333 prefecture-level cities in China, covering the years 2006–2022, to systematically investigate the nonlinear impacts, transmission pathways, and conditional constraints of GF on ACE. The key findings are: (1) a significant inverted U-shaped relationship between GF and ACE, where GF initially increases emissions but suppresses them after exceeding a turning point (approximately 0.276). This result remains robust across a series of tests including U-shape verification, system GMM, and instrumental variable approaches. (2) Farmer income plays a nonlinear mediating role in this relationship. Specifically, GF affects farmer income in a U-shaped manner, while farmer income is negatively correlated with ACE, thereby transmitting the inverted U-shaped relationship between GF and ACE. (3) The emission reduction effect of GF is limited by threshold effects related to rural human capital (single threshold) and digitalization level (double threshold). Exceeding these thresholds results in a stepwise enhancement of GF’s ability to suppress ACE. (4) A heterogeneity analysis reveals that the emission reduction effect is more pronounced in major grain producing areas once the turning point is surpassed, while it is weaker in national green finance reform and innovation pilot zones, indicating a “policy ineffectiveness” phenomenon. Based on these findings, several policy recommendations are proposed, including phased guidance for GF, region-specific strategies, the development of a synergistic “finance-income-emission reduction” promotion mechanism, and coordinated enhancements of human capital and digital infrastructure.