Does Green Credit Policy Move the Industrial Firms Toward a Greener Future? Evidence From a Quasi-Natural Experiment in China

How to utilize financial instrument to deal with environmental issues has been a focal topic. Taking the introduction of green credit program as a "quasi-natural experiment," the propensity score matching and difference-in-difference approach (PSM-DID) are used to investigate the impact of the green credit policy implemented by Chinese government on firm-level industrial pollutant emissions. The estimation results indicate that the green credit policy significantly reduces corporate sulfur dioxide emissions. Heterogeneity analysis shows this impact is more pronounced for large-scale enterprises and enterprises located in the eastern region. The estimated mediation models reveal that after the implementation of the green credit policy, reduction in sulfur dioxide emissions can be attribute to the increased environmental investment and improved energy consumption intensity. Moreover, the green credit policy is also significantly effective in mitigating the discharge of other common industrial pollutants. Our findings highlight the importance of green credit policies in achieving greener industrial production and more sustainable economic development.