Can carbon trading policy boost upgrading and optimization of industrial structure? An empirical study based on data from China

Carbon trading policy is a major mechanism innovation based on the market to deal with climate change and reduce greenhouse gas emissions. As the scale of China’s carbon trading market gradually expands, the impact of carbon trading policy on the upgrading and optimization of industrial structures has attracted much attention. This paper depicts the upgrading of industrial structure through the advancement of industrial structure, and the optimization of industrial structure through the rationalization of industrial structure. Using panel data from 201 prefecture-level and above cities in China from 2004 to 2018, this study empirically investigates the impact and mechanism of carbon trading policy on the upgrading and optimization of industrial structure based on a double difference and mediation effect model. The research results show that carbon trading policy can generally promote the upgrading and optimization of industrial structures, but there are significant differences between promoting the upgrading and optimization of industrial structures. Mechanism analysis shows that carbon trading policy can promote the upgrading and optimization of industrial structure through technological innovation, and technological innovation has an intermediary effect. Heterogeneity analysis shows that there are significant differences between the eastern region and the central and western regions in carbon trading policy promoting the upgrading and optimization of industrial structure. Carbon trading policy is conducive to the upgrading of industrial structure in the eastern region, while they are conducive to the optimization of industrial structure in the central and western regions. In addition, it was found that there are significant differences in the promotion of the upgrading and optimization of industrial structure by carbon trading policy among cities with different levels of human capital, fiscal expenditure, foreign investment, and infrastructure. These conclusions can provide policy inspiration for high-quality green economic development, environmental policy formulation, industrial policy formulation, and urban resource allocation.