<p>Amid rising climate volatility and more frequent extreme weather events, examining the carbon emission intensity linked to energy use has become a crucial policy issue. Local government debt, as a key financing instrument, may shape energy consumption and emission outcomes through the scale effect and environmental regulation effect. This study develops an input–output indicator system using a slacks-based measure model with undesirable outputs to estimate urban energy-related carbon emission intensity in China. Drawing on panel data from 2014 to 2022, we employ a two-way fixed effects model to identify the impact of local government debt and carbon emission intensity, and further apply a spatial Durbin model to test for spillover effects. The results show that the persistent rise of local government debt contributes to more effective management of energy consumption and carbon emissions, accompanied by notable spatial spillover effects. Heterogeneity analysis suggests that this effect is stronger in non-environmentally prioritized and resource-based cities. The study provides theoretical and empirical evidence supporting green fiscal reform, contributing to improved resource allocation and to policy efforts addressing climate and sustainability challenges.</p>