Abstract: Finance innovation is crucial in promoting firms’ emission abatement and realizing the carbon peaking and carbon neutrality goals. As a novel financial model that fosters technological innovation, technology finance offers new prospects for China’s green development. By constructing a partial equilibrium model of technology finance and firms’ emissions, we decompose the environmental effects of technology finance into scale effect, structure effect and technique effect. Using industrial firms as samples and “the pilot policy of combining technology and finance” as a quasi-natural experiment, we construct a difference-in-difference model to evaluate the causal effect of technology finance on firms’ emissions and its mechanisms, as well as the heterogeneity in cities, industries, and firm characteristics. We find that technology finance has significantly reduced firms’ emissions, resulting in a specific decrease of 6.1% and 6.6% in sulfur dioxide emissions and industrial wastewater emissions, respectively. Mechanism analysis reveals that technology finance exacerbates emissions by expanding production scale (scale effect), while reducing emissions by increasing the utilization of clean energy and recycled water, investing in emission reduction equipment (structure effect), and improving technological capabilities (technique effect). The structure effect and technique effect are greater than the scale effect. Furthermore, the emission reduction effect is mainly reflected in large cities, firms in high-pollution industries, and non-state-owned firms. The research findings provide useful references for the government to promote the implementation of combining technology and finance and explore new pathways for modern pollution control.