Sustainable for Whom? Industrial Competitiveness, Sustainable Industrialization and Carbon Inequality: Evidence From a Global Panel

ABSTRACT Industrialization is central to the sustainable development agenda, but its distributional environmental consequences remain insufficiently understood. This study examines how conventional industrial competitiveness and sustainable industrialization, the latter measured by the Sustainable Development Goal 9 Industry Index, relate to carbon inequality (CI), proxied by the carbon footprint of the top income decile. Using data for up to 99 countries over 1995‐2023, Method of Moments Quantile Regression (MMQR) and Panel Threshold Regression (PTR) are employed to uncover heterogeneity across the CI distribution and income‐dependent development regimes. The results show that both forms of industrialization are associated with higher CI, but with specific distributional patterns. The competitiveness‐CI relationship is positive across all quantiles and stronger at lower levels of CI, while the association with sustainable industrialization increases toward the upper tail. PTR estimates further show substantial regime dependence in the effect of industrial competitiveness, while the SDG 9‐CI relationship is comparatively stable across development regimes. Wealth inequality, urbanization, and globalization are associated with higher CI, whereas renewable energy and inclusive institutions generally exhibit mitigating effects. The findings remain largely robust to instrumental‐variable quantile regression, alternative CI measures, and a sample restricted to fully observed data. Overall, neither competitiveness‐driven nor sustainability‐oriented industrialization alone appears sufficient to deliver equitable environmental outcomes, highlighting the need for integrating distributional considerations and countries' development stages into industrial and climate policy.