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China's ambitious endeavor to curtail carbon emissions has led to heightened governmental attention on addressing the issue of excessive carbon emissions. As governmental tolerance for such emissions diminishes, governments promote and support more proactive emission reduction methods of green innovation in enterprises. This study analyzes panel data from Chinese-listed businesses to explore the correlation between regional carbon emission pressure and green innovation. Our findings indicate a positive relationship between carbon emission pressure and enterprises' engagement in green innovation initiatives. Governmentenvironmental attention, punitive regulations, and incentive subsidies are the main channels. Market policies, including carbon emission trading and green credit policies, potentially impact the interplay between carbon emission pressure and green innovation. Moreover, our heterogeneity analysis underscores that enterprises facing looser financing constraints, exhibiting more social responsibility initiatives, and operating within polluting industries tend to experience a more pronounced positive impact than their counterparts in other sectors. • Regional carbon emission pressure has significantly promoted enterprises' green innovation. • Government awareness, punitive regulations, and incentive subsidies are the main channels. • The 2015 Paris Agreement in 21st United Nations Climate Change Conference contributes to the promotion of green innovation of enterprises. • The carbon emission trading and green credit policies enhance the promotion of green innovation. [ABSTRACT FROM AUTHOR]

Climate policies such as carbon tax and green finance policy are critical measures to promote low-carbon transition worldwide. These policies are, however, likely to interact with each other and create unintentional consequences. This paper adopts a stock-flow consistent model to theoretically explore the effects of policy interactions. Specifically, commercial banks, as the key credit creators and critical players in providing source of finance, are included. Based on the numerical simulations of the dynamic model, we find that both carbon tax and green finance policies render positive impacts on low-carbon transition. In addition, green credit incentives, if imposed simultaneously with carbon tax, can enhance the positive effects. Although low-carbon transition could generate higher net government revenues, our results show that banking sector tends to expose to higher financial risks when firms' debt-equity ratio rises. Further analysis shows that subsidies on green loans can support green transition and bring positive consequences to debt rollover and social welfare, indicating the needs for active government intervention to improve policy effectiveness. The framework proposed in this paper provides a useful way to understand policy dilemmas in pursuing low-carbon transition and give important implications to form optimal policy mix. • A stock-flow consistent model is developed to examine climate policy interactions. • We show that climate policy-mix can generate both positive and negative effects. • Green finance policies can enhance green investment and induce higher financial risks. • Active government intervention such as green subsidies can ease financial distress and improve policy effectiveness. [ABSTRACT FROM AUTHOR]