In recent years, the intricate relationship between the development of science and technology financial ecosystems (STFE) and carbon emission reduction has garnered significant attention from policymakers and researchers alike. A groundbreaking study utilizing panel data from 284 prefecture-level cities across China, spanning 2011 to 2020, offers profound insights into how STFE influences total factor carbon productivity (TFCP) through complex spatial spillover effects. Employing advanced dynamic spatial Durbin models (DSDM), this research uncovers the nuanced geographic and economic disparities that underpin the effectiveness of STFE in curbing urban carbon emissions.
One of the most striking findings of this comprehensive analysis is the pronounced spatial inequality in STFE distribution across China. The eastern regions, with their dense concentration of financial resources, dramatically outpace the central and western regions in terms of STFE development. This uneven distribution creates a distinct gradient characterized by “high in the east and low in the west.” Correspondingly, the pattern of TFCP exhibits a block-like spatial distribution predominantly centered around mid- and low-level cities, punctuated by isolated high-TFCP urban points. This spatial heterogeneity reflects underlying economic and infrastructural discrepancies, with technological innovation serving as a crucial driver underpinning improvements in TFCP.
Delving deeper into the spatial dynamics, the study’s regression models reveal a complex dual effect of STFE on carbon emission reduction. Locally, the existence and growth of STFE are strongly associated with enhanced emission reduction within the city itself, underscoring its role in fostering green technologies and sustainable practices. Yet this beneficial local effect is counterbalanced by a troubling negative externality in neighboring cities. The indirect effects highlight a “beggar-thy-neighbor” spatial spillover, where STFE growth in one city inadvertently hampers carbon reduction efforts in adjacent regions. This paradox illustrates the spatial competition for financial and technological resources that can lead to environmental degradation beyond a city’s borders.
This pattern persists robustly across both static and dynamic spatial Durbin models and remains statistically significant after rigorous robustness checks and endogeneity corrections. Such findings emphasize the intricate and sometimes counterintuitive spatial interdependencies that complicate the relationship between financial scientific ecosystems and environmental outcomes. They reveal that uncoordinated local development of STFE may, paradoxically, undermine regional sustainability objectives by displacing polluting activities or drawing away critical innovation inputs from neighboring regions.
Further dissection of the data uncovers notable regional and resource-based heterogeneities driving these spatial spillovers. The negative spillover effect of STFE development on carbon reduction manifests predominantly in the eastern region, reflecting the region’s advanced state and aggressive financial ecosystem growth. In contrast, the central and western regions exhibit minimal spatial spillover impacts, likely due to their relatively nascent stages of STFE development. Moreover, non-resource-based cities display a more pronounced positive spatial spillover effect, leveraging the STFE to bolster emission reduction beyond their boundaries, while resource-rich cities face challenges transitioning their economies and thus exert less beneficial spillovers.
The financial development level also emerges as a critical moderator. Areas with high financial maturity significantly amplify the positive carbon reduction effects of STFE both locally and on adjoining regions, whereas regions with weaker financial infrastructures lag behind. This underscores the importance of an integrated approach that enhances both the financial environmental ecosystem and underlying financial institutional development to maximize emission reduction benefits across the economic geography.
Mechanistically, the study sheds light on the pathways through which STFE affects neighboring regions’ carbon emissions. Counterintuitively, several mechanisms—including green technology innovation, human capital siphoning, informatization digital divides, and competitive exclusion in financial resource allocation—act to increase emissions in adjacent areas. This paradoxical effect exacerbates the “beggar-thy-neighbor” phenomenon as cities with advanced STFE siphon talent, technology, and financial resources away from neighbors, intensifying their carbon output. The interplay of informatization levels and human capital availability further intensifies these negative spillovers, revealing an unsettling complexity in regional coordination challenges.
Given these multi-layered findings, policy implications are both urgent and multifaceted. Tailored regional policies recognizing the stark interregional disparities in STFE capacity are imperative. For the underdeveloped central and western regions, direct financial incentives such as subsidies, tax rebates, and the establishment of specialized technology finance entities can catalyze local STFE, bridging the gap with the eastern powerhouses. Supporting medium- and low-level TFCP cities in these regions to transition toward higher productivity through targeted investment in low-carbon technologies is essential to rebalancing the spatial distribution of emission reduction capabilities.
Simultaneously, regional cooperation frameworks must be strengthened to overcome the inefficiencies and externalities spawned by fragmented STFE development. Collaborative governance that explicitly accounts for responsibility-sharing and compensates regions adversely affected by neighboring financial ecosystems is crucial. For instance, cross-region carbon emission reduction compensation mechanisms can provide economic incentives that mitigate competitive negative spillovers. Moreover, harmonized environmental supervision and policy alignments will be vital to prevent the geographic shifting of carbon-intensive activities under the guise of STFE-driven development.
Within the eastern region, where STFE is strongest, efforts should concentrate on innovating cooperation modalities with neighboring areas to mitigate negative spillovers while sustaining aggressive local carbon reduction. Investment in green technology industries must be scaled up, alongside fostering synergies that spread environmental benefits rather than exacerbate regional inequalities. For resource-dependent cities, strategic industrial transformations anchored by STFE-led green technology development are necessary to minimize carbon footprints and stimulate low-carbon competitiveness.
Financial infrastructure development remains a cornerstone for broader emission reduction. In financially lagging areas, increased investment in financial services capacity and infrastructure will enable more effective STFE deployment. Contrastingly, in financially advanced regions, leveraging synergies with neighbors through joint ventures and collaborative innovation can magnify carbon reduction outcomes, transforming localized gains into regional progress.
Governments also bear a crucial role in dismantling the structural constraints that perpetuate spatial environmental externalities. Establishing cross-regional collaborative governance frameworks and transferable green technology compensation systems can diffuse technological monopolies and foster equitable innovation distribution. Cultivating human capital through graduated educational investment and enabling flexible talent mobility policies will bridge discrepancies in environmental governance capabilities, enhancing regulatory reach across regions.
Bridging digital divides remains central to curbing negative spillovers. The equalization of digital infrastructure promotes transparency and limits spatial arbitrage opportunities exploited through emerging technologies such as blockchain for carbon footprint tracking. Developing digital regulatory competence alongside shared carbon credit and emission right trading mechanisms opens promising avenues for reconfiguring resource allocation at a supra-local scale, integrating financial and environmental goals more tightly.
Finally, nuanced policy instruments addressing the observed moderating effects of informatization and human capital must be prioritized. Enhancing digital regulatory frameworks and bolstering human capital reserves attuned to low-carbon technologies will mitigate amplified negative externalities. Complementing these efforts with horizontal ecological compensation payment systems can equitably distribute the costs and benefits of carbon reduction, fostering a cooperative spatial planning landscape where emission targets and innovation trajectories are jointly owned.
This pioneering research elucidates that science and technology financial ecosystems hold transformative potential to shape sustainable urban futures in China. Yet, unlocking this potential requires sophisticated regional coordination and policy innovation that transcends traditional boundaries of fiscal competition and environmental governance. Mitigating the “beggar-thy-neighbor” effect involves orchestrating a delicate balance of incentives, regulatory frameworks, and cross-sector collaboration. As the world grapples with climate urgency, China’s experience offers critical lessons in harnessing financial science and technology pathways to achieve spatially equitable carbon emission reductions.
The study’s integration of dynamic spatial econometric modeling with robust empirical evidence marks a significant advance in understanding the geography of green finance and its environmental repercussions. Policymakers globally can glean insights on aligning financial innovation ecosystems with sustainable development goals, highlighting the need for holistic systems thinking in the design of green finance strategies. As STFE continues to evolve, ongoing monitoring and adaptive governance will be paramount to amplify positive impacts and suppress adverse spatial externalities.
In conclusion, while science and technology financial ecosystems are pivotal in driving local carbon emission reductions, their spatial spillovers introduce complexities demanding strategic regional cooperation and infrastructural investment. The path forward lies in embracing a collaborative, multi-dimensional governance paradigm that harmonizes financial dynamism with environmental integrity. Through such integrative approaches, the promise of STFE as a catalyst for sustainable urban decarbonization can be realized in a manner that is inclusive, equitable, and resilient across diverse socio-economic landscapes.
Subject of Research: Science and Technology Financial Ecosystem (STFE) and its spatial spillover effects on carbon emission reduction efficiency across Chinese cities.
Article Title: Mechanisms and spatial spillover effects of science and technology financial ecosystem on carbon emission reduction from multiple perspectives: evidence from China.
Article References:
Zhang, J., Sun, Z. Mechanisms and spatial spillover effects of science and technology financial ecosystem on carbon emission reduction from multiple perspectives: evidence from China.
Humanit Soc Sci Commun 12, 1025 (2025). https://doi.org/10.1057/s41599-025-05423-5
Image Credits: AI Generated
