This paper investigates the impact of China's carbon trading policy (CTP) on industrial structure upgrading (UIS) and optimization (OIS) using panel data from 201 prefecture-level cities between 2004 and 2018. The study finds that CTP generally promotes both UIS and OIS, but with significant differences. Mechanism analysis reveals that technological innovation mediates the effect of CTP on both UIS and OIS. Heterogeneity analysis shows regional differences, with CTP more conducive to UIS in the east and OIS in the central and western regions. Urban characteristics like human capital, fiscal expenditure, foreign investment, and infrastructure also influence the impact of CTP.

Daoping Chen, Haifeng Liao, Hong Tan