Pathways to climate neutrality: The role of structural change

Abstract The global economy continues to endure the adverse effects of climate change whose impact remains a threat multiplier that could impair the socioeconomic development of countries. This study examines the role of the changing structure of economies in the quest to achieve climate neutrality targets. To achieve this, the effect of structural change on environmental quality in the context of three major greenhouse gases (carbon dioxide, methane and nitrous oxide) is examined. The data of the top 20 polluting countries from 1990 to 2020 is analysed. Interestingly, the results suggest that structural change may not necessarily enhance attaining climate neutrality if more greenhouse gases are considered aside from carbon emissions. Further, an increase in affluence factors, energy‐intensive technologies and population limit the attainment of climate neutrality due to their stimulating effect on the emission of all three greenhouse gases. However, renewable energy adoption is found to enhance the attainment of climate neutrality. These findings have far‐reaching implications for policies aiming to achieve climate neutrality targets.