Financial development and carbon emissions in China since the recent world financial crisis: Evidence from a spatial-temporal analysis and a spatial Durbin model

China's financial development boomed after the recent world financial crisis in 2007. Financial development may affect an economy and hence carbon emissions significantly. No research has examined their relationship since this crisis up to now. Against this background, the effect of financial development on carbon intensity in China from 2007 to 2016 is investigated. The spatial and temporal patterns, and the dynamic evolution of both China's provincial carbon emissions and financial development were firstly investigated. Then a Spatial Durbin Model was employed to explore the effects of financial development, since this crisis, on carbon intensity, controlling related variables. The results show that financial development will significantly increase the local province's emissions but significantly decrease adjacent areas' emissions to a larger extent, so that the overall effect is that financial development will curb carbon emissions. The paper concludes that carbon emission reductions in China since 2007 may not be caused by the financial resources being channeled into the research and development of emission-reduction technologies or into high value-added firms. Hence, it is suggested that measures be taken to channel financial resources into the right projects and firms.