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ORIGINAL RESEARCH
Nonlinearity, Heterogeneity and Indirect Effects
in the CO2 Emissions-Financial Development
Relation From Partial Linear Additive
Panel Model
1
School of Public Administration, Shandong Technology and Business University, Yantai, Shandong, PR China
2
School of Public Finance and Taxation, Capital University of Economics and Business, Beijing, PR China
3
School of Finance, Shandong Technology and Business University, Yantai, Shandong, PR China
Submission date: 2023-12-04
Final revision date: 2024-02-28
Acceptance date: 2024-03-23
Online publication date: 2024-07-01
Publication date: 2025-01-02
Qichang Xie
School of Finance, Shandong Technology and Business University, Yantai, Shandong, PR China
School of Finance, Shandong Technology and Business University, Yantai, Shandong, PR China
Pol. J. Environ. Stud. 2025;34(1):67-82
KEYWORDS
CO2 emissionsfinancial developmentmarginal and spatial analysismoderating effectspartial linear additive panel model
TOPICS
ABSTRACT
Assessing the effect of financial development on carbon pollution has recently attracted growing
interest due to the important role of finance in the overall economic and energy system. However,
numerous studies explored the direct impact of financial performance from an aggregate perspective,
which ignores the potential nonlinear and indirect effects. By generating a new financial development
index covering banks, insurance, and securities, this paper introduces a partial linear additive panel
model with data-driven features to simultaneously explore the direct and indirect impacts of China’s
financial development on CO2 emissions from nonlinear perspectives. Moreover, instead of the traditional
linear marginal analysis, we perform a nonlinear marginal analysis and implement a spatial analysis to
address the above objectives. The results manifest that the direct impact of financial development on
CO2 discharges is a nonlinear “U-shaped”; In contrast, the moderation effect through economic growth
suggests that financial development contributes to reducing CO2 concentrations. Marginal analysis
shows that the effect of financial development on CO2 emissions not only exhibits individual differences
but also reflects the characteristics of temporal transition. The results of spatial analysis verify that the
development of finance has prominent spatial effects on CO2 discharges. The findings have important
policy implications on how to effectively promote financial development to formulate more flexible
investment policies and differentiated energy strategies.
CONFLICT OF INTEREST
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
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