Digital Inclusive Finance and Urban Carbon Intensity Reduction: Unraveling Green Credit Mechanisms and Spatial Heterogeneity Across Chinese Cities

In alignment with China’s carbon peak and carbon neutrality commitments, digital inclusive finance (DIF) has emerged as a strategic instrument for carbon emission mitigation, facilitated by coordinated policy interventions and market-driven innovations. This study conducted an original multi-dimensional investigation into DIF’s carbon intensity reduction effects through an integrated analytical framework. Employing two-way fixed effects and mediation analysis models, we systematically evaluated both direct impacts and green-credit-mediated pathways using panel data across 247 Chinese cities from 2011 to 2020. A dynamic Spatial Durbin model further elucidated the spatiotemporal evolution of DIF’s spatial spillover effects. It was found that DIF development can reduce the carbon intensity of cities, and in particular, this phenomenon shows different effects in different types of cities. Green credit mechanisms effectively mediate their effects in the decarbonization process of DIF, confirming their key role in financial intermediation. In addition, DIF has a strong cross-regional spatial spillover effect, and its carbon emission reduction impact transcends local administrative jurisdictions. The results of this study will provide valuable insights and practical recommendations for policymakers and stakeholders to develop effective carbon reduction strategies that contribute to sustainable development in China and globally. © 2025 by the authors.