The Effect of Industrial Structure Change on Carbon Dioxide Emissions: A Cross-Country Panel Analysis

Abstract Reduction of carbon dioxide (CO2) emissions is one of the biggest challenges for global sustainable development, in which economic growth characterized by industrialization plays a formidable role. We innovatively adopted the input and output (I-O) table of 41 countries released by World I-O Database to determine the industrial structure change and analyze its impact on CO2 emission evolution by developing a cross-country panel model. The empirical results show that industrial structure change has a significantly negative effect on CO2 emissions; to be specific, 0.1 unit increase in the linkage of manufacturing sector and service sector will lead to a decrease of 0.94 metric tons per capita CO2 emissions, indicating that upgrading industrial structure contributes to carbon mitigation and sustainable development. Further, urbanization, technology and trade openness have significantly negative impact on CO2 emissions, while economy growth and energy use take positive impacts. In particular, a 1% increase in per capita income will contribute to an increase of 8.6 metric tons per capita CO2 emissions. However, the effect of industrial structure on environment degradation is moderated by technology level. These findings fill the gaps of previous literature and provide valuable references for effective policies to mitigate CO2 emissions and achieve sustainable development.