Applying the Peking University Digital Financial Inclusion Index from 2011 to 2018, we explore the dynamic spatial-temporal correlation effects of digital finance and environmental regulation on manufacturing carbon emissions, emphasizing competition and resolving endogeneity issues. The result reveals that: (1) digital finance reduces local carbon emissions while increasing those of neighbors to a large extent, the overall reduction effect gradually emerges over time; (2) environmental regulation mitigates carbon emissions in both the short and long term with a marginal increasing trend; and (3) financial institution competition promotes these reduction effects. Combining “effective markets” and “responsive governments” yields superior emission reduction.