Digital finance policy and the challenge of air pollution in China

Air pollution presents a substantial global challenge, significantly impacting human health, biodiversity, and ecosystems. Pollutants released from industrial activities, transportation, and agriculture degrade air quality (Anwar et al., 2021; Coelho et al., 2023). Key pollutants such as particulate matter, nitrogen oxides, sulfur dioxide, and volatile organic compounds are linked to respiratory diseases, cardiovascular issues, and other health problems (Yoshino et al., 2021; Rasoulinezhad & Taghizadeh-Hesary, 2022; Anjum et al., 2021). Furthermore, air pollution disrupts ecosystems and endangers biodiversity by damaging plant life, contaminating water bodies, and reducing soil fertility (Aung et al., 2017). It also aggravates climate change by altering atmospheric composition and influencing weather patterns.
Ambient particulate matter (PM) pollution in China represents a formidable public health challenge, with staggering consequences (Lu et al., 2023; Li et al., 2023). Every year, approximately 1 million people succumb to air pollution-related causes, primarily attributed to PM2.5, PM10, and other particulate matter, resulting in economic losses exceeding 100 billion US dollars. Industrial sources stand out as the primary contributors to PM2.5 concentration in key urban areas like Beijing, Tianjin, and Baoding, accounting for 39%, 37%, and 40% of the pollution, respectively (Cai et al., 2023). Notably, all cities except Chengdu exhibit outliers for particulate matter pollution, with Beijing and Guangzhou experiencing extreme values (Zhang et al., 2020).
Over the last few decades, China has implemented a series of ambitious policies to combat air pollution and promote environmental sustainability. One notable initiative is the National Air Quality Action Plan launched in 2013, which earmarked a significant budget of $270 billion to tackle ambient air pollution. Additionally, the Beijing city government allocated an extra $120 billion for similar efforts (Liu et al., 2022; Wang et al., 2023). This plan aimed to reduce fine particulate matter pollution (PM2.5) levels by 10% compared to 2020 levels and ensure that heavily polluted days accounted for less than 1% of the year. Moreover, in 2018, the State Council unveiled a three-year action plan with the objective of “winning the defense of the blue sky,” targeting a reduction in total emissions of major air pollutants (Mao et al., 2023). Furthermore, China has set even higher targets for its Nationally Determined Contributions (NDCs), pledging to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060.
Digital finance policy represents a key instrument in China’s efforts to mitigate air pollution by facilitating the transition to cleaner and more sustainable energy practices. By leveraging digital finance technologies such as blockchain, artificial intelligence, and big data analytics, China can enhance transparency, efficiency, and accountability in environmental management. Specifically, digital finance can streamline the allocation of funds towards renewable energy projects, energy-efficient infrastructure, and pollution control measures. Moreover, it enables the implementation of innovative financial instruments such as green bonds and carbon trading platforms, which incentivize investment in low-carbon technologies and emissions reduction initiatives. Additionally, digital finance platforms can empower individuals and businesses to monitor their energy consumption, assess their carbon footprint, and adopt eco-friendly behaviors through digital payment solutions and data-driven insights. Overall, the integration of digital finance policy into China’s environmental agenda holds immense potential to accelerate progress towards cleaner air and a more sustainable future.
The implementation of digital finance policy in mitigating air pollution in China comes with both advantages and limitations, which are influenced by factors such as IT infrastructure, digital literacy, sustainable literacy, and Human Development Index (HDI) levels. One of the advantages lies in the potential for digital finance to enhance transparency and efficiency in allocating funds towards green initiatives, thanks to China’s robust IT infrastructure and increasing digital literacy among its population. Moreover, digital finance can promote sustainable literacy by providing access to information and resources on environmentally friendly practices, thereby fostering a culture of eco-consciousness. However, limitations arise from disparities in digital infrastructure and literacy across regions, with rural areas often lagging behind urban centers. Additionally, while digital finance can enable access to green financing options, disparities in HDI levels may restrict the adoption of sustainable practices among marginalized communities.
This paper focuses on exploring how digital finance policy can effectively aid in controlling and reducing air pollution in China. The main hypothesis suggests that incorporating digital finance mechanisms into environmental policy frameworks can improve the efficiency, transparency, and effectiveness of air pollution mitigation efforts. The study is motivated by the urgent need to address environmental challenges in China, especially air pollution, which profoundly affects public health, economic development, and ecological sustainability. By examining the role of digital finance policy in tackling this critical issue, the research aims to offer insights into innovative approaches for enhancing environmental governance and promoting sustainable development in China.
This study introduces several key research novelties compared to previous work evaluating the impact of digital finance policy on air quality in China. Firstly, it provides a detailed examination of how digital finance policy specifically aids in controlling and reducing air pollution, unlike earlier studies that may have considered broader impacts without focusing on environmental outcomes. Secondly, it identifies and analyzes the factors influencing the relationship between digital finance policy and air quality improvement, shedding light on how digital finance interventions can be optimized for environmental benefits. Moreover, this study employs advanced methodologies such as econometric modeling, spatial analysis, and machine learning techniques to more accurately quantify the impact of digital finance policy on air quality, offering a more comprehensive and in-depth analysis than previous studies.
This paper investigates the impact of digital finance on air quality in China using annual data from 1990 to 2022, highlighting the significant role of digital finance, particularly internet banking, in reducing air pollution levels. The findings reveal a substantial negative correlation between internet banking adoption and the air pollution index, suggesting that increased internet banking usage leads to reduced vehicular emissions and more efficient financial operations, thereby aiding environmental conservation efforts. Similarly, ATM banking also shows a negative association with air pollution, although to a lesser extent compared to internet banking, indicating that digital financial services overall contribute to improved air quality.
The paper is structured to thoroughly examine the impact of digital finance policy on air pollution control and reduction in China. Section “Introduction” introduces the research topic and outlines the organization of the paper. Section “Literature discussion” provides an extensive review of existing literature on digital finance policy and its effects on air quality in China, setting the foundation for the study. Section “Theoretical background” delves into the theoretical background, discussing relevant concepts and frameworks that inform the research methodology. In section “Research methodology”, we describe the data sources, modeling approaches, and analytical methods used to assess the relationship between digital finance policy and air pollution mitigation. Section “Findings” presents the empirical findings, highlighting the impact of digital finance interventions on improving air quality. The final section synthesizes the key findings, and discusses their implications.
link