The Dynamic Relationship Between Industrial Structure Upgrading and Carbon Emissions: New Evidence from Chinese Provincial Data

Industrial structure upgrading (ISU) plays a critical role in reducing carbon emissions (CO2 emissions); however, the existing literature lacks dynamic research on the relationship between the two. Based on provincial panel data from China between 2002 and 2021, this paper establishes a time-varying coefficient two-way fixed-effects model to empirically explore the dynamic effects of ISU on CO2 emissions. The findings indicate that the overall impact of China’s ISU on CO2 emissions demonstrates a dynamic tendency of initially promoting and subsequently inhibiting such emissions and, since 2016, ISU has had the ability to significantly reduce CO2 emissions. This time-varying trend is highly related to the evolving direction and stage of the ISU. During the initial stage of ISU, dominated by industrialization, the promotional effect is dominant in terms of CO2 emissions, but with the development of tertiary and emerging industries, its inhibitory effect is continuously enhanced and, eventually, ISU can significantly suppress CO2 emissions. Further, regional heterogeneity analysis shows that in the eastern and western regions of China, ISU has always inhibited CO2 emissions, while in the central and northeastern regions, ISU first promotes and then inhibits CO2 emissions, which is similar to the overall pattern in China. Based on these findings, relevant policy suggestions are provided to promote sustainable economic and environmental development.