Green credits, green securities, renewable energy, and environmental quality: a comparative analysis of sustainable development across Chinese provinces

Combating climate change has emerged as a critical mandate for sustainable development, particularly among the top polluters. Green financial instruments have become popular in this regard as the world is shifting to a low-carbon economy to curb global environmental deterioration. This study assesses how renewable energy and two major green financial instruments, green credits (TLBs) and green securities (CAPs), affect environmental quality during the 1992Q1-2020Q4 period. We focused on China, the world's second-largest economy and one of the main CO2 emitters, as a case study from which other countries can adjust their green policies to sustainable development. In a comparative analysis, we mainly employed the method of moments-quantile regression (MM-QR) with the fixedeffects model and Granger's spectral causality in the frequency domain. First, the results revealed that green securities effectively reduced CO2 emissions in all regions at all quantiles than green credits that mainly improved environmental quality in the eastern region, unlike the central and western regions in most cases. Second, we found disparate and asymmetrical effects of the size of TLBs and CAPs on CO2 emissions across provinces. Third, renewable energy consumption enhanced environmental quality in all provinces. In contrast, economic growth, oil prices, urbanization, trade openness, and foreign direct investments have heterogeneous effects over time on CO2 emissions across provinces. Accordingly, based on the special characteristics of each region, our findings imply heterogeneous and specific green policies for sustainable development over time.