Environmental sustainability is becoming a crucial objective in this modern era. To attain this objective, it is important to reduce CO2 emissions for ensuring sustainable development. This study examined the nonlinear impact of government and household expenditures on CO2 emissions in China during 1984-2019. The modified nonlinear ARDL method is used for estimates. Asymmetric empirical outcomes show that a positive and negative change in government expenditure has reduced CO2 emissions in the short and long run in China. However, the positive and negative effects of government expenditure are higher in long run than short run. Furthermore, the asymmetric model gives much more significant results than the traditional symmetric model. Similarly, a positive change in household expenditure has a positive influence on CO2 emissions in the short and long run, while a negative change in household expenditure has a negative impact on CO2 emissions in the long run. The findings of the study recommended that there is a need to promote green spending in the economy that encourages environmental sustainability.