How Green Finance Can Help Cut Agricultural Carbon Emissions and Drive Sustainable Farming in China

What is it about?

Agriculture plays a vital role in food production and rural livelihoods but is also a major source of greenhouse gas emissions in developing countries. As the world moves toward sustainable development, it has become increasingly urgent to explore how financial mechanisms can help reduce the environmental footprint of agriculture. This study investigates the role of green finance (GF)—financial services designed to support low-carbon and environmentally friendly projects—in mitigating agricultural carbon emissions (ACE) in China. Using a dataset covering 207 Chinese cities from 2006 to 2022, the study employs a fixed-effect econometric model to examine how green finance influences agricultural emissions across different regions. The empirical results reveal that green finance significantly curbs agricultural carbon emissions by channeling financial resources toward cleaner production methods, energy efficiency, and green technology applications. The effect is particularly strong in western China, where financial investment and environmental regulation have accelerated the transformation toward sustainable agricultural practices. The research also explores two mediating factors—digital infrastructure (DI) and green technological innovation (GTI)—that strengthen the link between finance and sustainability. Both DI and GTI enhance the efficiency of resource allocation and technological diffusion in agriculture, further reducing emissions. Overall, the study provides robust evidence that green finance can serve as a powerful policy tool to promote low-carbon agricultural development, support technological upgrading, and contribute to China’s agricultural carbon neutrality and sustainable development goals.

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Photo by Dominik Sostmann on Unsplash

Photo by Dominik Sostmann on Unsplash

Why is it important?

Ensuring environmental sustainability in agriculture is essential for achieving both food security and climate goals. In many developing countries, including China, agricultural production remains energy-intensive and heavily dependent on fossil fuels. This creates a “carbon lock-in” that hinders green transformation. The findings of this study demonstrate that green finance can play a decisive role in breaking this lock by directing capital flows toward clean energy use, ecological farming, and resource-efficient technologies. By confirming that green finance significantly reduces agricultural carbon emissions, the research provides crucial policy insights for government departments, financial institutions, and rural development agencies. It shows that financial innovation can be a powerful instrument not only for economic growth but also for environmental improvement. Furthermore, the identified mediating roles of digital infrastructure and green technological innovation highlight the importance of integrating finance, technology, and digitalization to achieve sustainability. The study’s results offer a valuable reference for designing targeted financial policies that promote low-carbon agricultural development, encourage technological adoption, and optimize resource allocation. In a broader sense, it contributes to global discussions on how to align financial systems with sustainable agricultural transitions, supporting the realization of carbon neutrality and the United Nations’ Sustainable Development Goals (SDGs).

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