China has incorporated carbon peaking and carbon neutrality into the overall layout of its ecological civilization construction. Finance, as the foundation and pillar of national governance, plays a key role in reducing carbon emissions. Based on China's provincial panel data from 2007 to 2018, this paper uses the system GMM model to test the impact of fiscal expenditure structure on carbon emissions and its transmission mechanism. The findings show that to increase the proportion of non-economic public expenditure is in favor of carbon emission reduction, that non-economic public expenditure maintains a promoting role in carbon emission reduction through the scale effect, budget effect and substitution effect, while the direct effect and environmental regulation effect maintain an inhibitory effect on carbon emissions. The new urbanization construction is an important path for fiscal expenditure to affect carbon emissions. When utilizing the economic urbanization index to measure the mediating effects, it is found that there is a negative relationship between non-economic public expenditure and carbon emissions, and that to adjust the fiscal expenditure structure can stabilize the economic development, optimize the industrial structure, and reduce carbon emissions. When utilizing the population urbanization index to measure the mediating effect, it is found that there is a positive relationship between non-economic public expenditure and carbon emissions and that to improve the fiscal expenditure structure can adjust urban population and employment level, and achieve the carbon emission reduction targets. Therefore, it is necessary to promote the transformation of fiscal expenditure policy to green, low-carbon and ecological coordinated development mode, give full play to the guiding role of finance in high-quality economic development, accelerate industrial green upgrading, and form a benign interaction between new urbanization construction and ecological environment.