A Study On The Impact Of Financial Development On Carbon Emission In Western China

In order to solve greenhouse effect and cope with the global climate change, Low carbon has indisputably become one of the epoch topics in today’s world. As the largest emitter of carbon in the world, to reduce carbon emissions and develop low carbon economy road has become top priority for China.Especially for the western region of China which has high pollution and energy consumption. To adjust the structure of economic development and improve the level of technology are the key to complete the task. But the change can not implement without the support of finance. Therefore this paper takes the western region of China as example and choose panel data from 1995 to 2012 to discuss the relation between the financial development and carbon emissions, in hope that this can provide reference for western area’s green development road.In this paper investigates the influence of financial development on carbon emissions from theoretical and empirical part. In theory, financial development can give full play to the function such as the allocation of resources to affect the upgrading of industrial structure and technological progress, at last these impact on carbon emissions. On the basis of theoretical analysis, we take system GMM estimation method, select four financial development indexes of financial development scale, financial development efficiency, financial development structure and financial development of comparative advantage to build dynamic model with carbon respectively. From the empirical result we find that in the four models GDP, Tech, and Ind advantage to the carbon emissions reduction, but the energy consumption and open bring the increase of carbon emissions observably. And on carbon emission elasticity, long-term elasticity is greater than the short-term elasticity. For financial development indicators, in addition to the indicator of financial development structure, the remaining three indexes have a negative relationship with carbon emissions, those can reduce carbon emissions. In order to verify the existence of Kuznets curve, the square of financial development is added to the model, the result show that except the financial development scale, there is inverted u-shaped relationship between carbon emission and other financial variables, and financial comparative advantage is the most significant. According to the analysis results, this paper puts forward several countermeasures and suggestions how to use financial development to achieve carbon reduction in western area. Firstly, we should improve energy consumption structure and optimize the industrial structure. Secondly, developing green finance to help the smooth progress in carbon emissions trading. Thirdly strengthen financial support for other industries, and achieve low carbon environment. Lastly but not the worst, promote the carbon financial market development in actively western area.