With carbon emissions becoming more and more closely related to human activities and China being the world's largest emitter of carbon dioxide, the cost of environmental quality deterioration is high and environmental sustainability is low. Against this background, it is urgent to implement low-carbon recycling and green development by introducing green funds based on the role of environmental regulation intensity. Therefore, based on the data of 30 provinces from 2004 to 2019, the paper considers the dynamic impact of environmental regulation intensity and green finance development on regional environmental sustainability. The provincial data involve specific spatial locations and focus on the economic interactions among provinces, and the spatial econometric model is very applicable. Based on the spatial econometric model, this paper empirically examines the direct effect, spatial spillover effect, and total effect, considering both spatial and temporal patterns. The research shows that (1) China's provincial environmental sustainability shows a noticeable spatial agglomeration effect, which is significantly and spatially autocorrelated and clustered. (2) Based on the national level, an increase in the intensity of environmental regulation will significantly increase regional environmental sustainability, and the development of green finance will also significantly increase regional environmental sustainability. Additionally, the environmental regulation intensity has a significant positive spatial spillover effect, which may increase environmental sustainability in neighboring provinces. There is also a significant positive spatial spillover effect of the impact of green finance development on environmental sustainability. (3) Based on the provincial level, the impact of environmental regulation and green financial development on environmental sustainability in each region is significantly positive, with the most significant impact in the western region and the smallest coefficient in the eastern region. The paper proposes policy and managerial implications to promote regional environmental sustainability based on the above findings.

Keywords: Environmental regulation intensity; Environmental sustainability; Green finance; Spatial Durbin model.

© 2023. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.