This study explores the role of financial market development in advancing low-carbon economic growth, focusing on 33 European countries, including both EU member states and Central and Eastern European Countries (CEECs), from 2000 to 2023. Using a robust empirical strategy based on panel data and spatial extensions of the Difference-in-Differences (DID) framework, the research examines how renewable energy (RE) and technological innovation (TI) act as channels through which financial development influences carbon outcomes. Stock market capitalization is adopted as a key indicator of financial market maturity, reflecting its pivotal role in mobilizing capital for green investments. The findings indicate that, in the absence of explicit modeling of RE and TI, financial market development may inadvertently intensify carbon emissions. However, when these mediating factors are considered, financial systems contribute positively to carbon efficiency and the expansion of clean energy. RE consumption consistently reduces carbon intensity, while TI shows mixed effects, underscoring the importance of policy alignment. Trade openness also appears beneficial, fostering technology diffusion and energy efficiency. Spatial and temporal dependencies across countries are accounted for, strengthening the robustness of the results. The analysis provides actionable insights for integrating financial and environmental objectives, especially in economies at different stages of financial maturity. By highlighting the conditional impact of finance on sustainability, the study advances academic understanding and informs public policy. Its contribution lies in offering empirical evidence on how financial markets can serve as both a driver and a moderator of carbon outcomes, depending on the mechanisms in place.