Green technology innovation, environmental externality, and the cleaner upgrading of industrial structure in China - Considering the moderating effect of environmental regulation

Under the requirements of high-quality development of China's economy, how to impel the industrial structure towards a cleaner upgrading path becomes a matter of urgency. Various studies have investigated the role of technology innovation in industrial restructuring and upgrading, however, generally been conducted under the framework of the traditional economic research paradigm which solely aims at economic expansion and economic growth but ignores the extensive consumption of energy and the increasing environmental costs. This study seeks to fill the gap in research by expanding the traditional measurement of industrial upgrading, and further discovering the internal logic between green technology innovation, environmental regulation and the cleaner upgrading of industrial structure in the context of China. Based on empirical regressions on a panel data from China's 35 industrial sectors during 2002-2019, our results have evidenced that green technology innovation is a valid driving force in facilitating the cleaner upgrading except for the Low value-added & Cleaner (LC) sectors. Environmental regulation presents negative direct impacts on industries' cleaner upgrading; while given the obvious industrial heterogeneity, the moderating effects of environmental regulation appear to be quite complex. These findings provide an important policy basis for the formulation of green transformation strategies of China's industries.