This research aims to study the main influencing factors of China’s industrial carbon productivity by incorporating environmental regulation and technical progress into an econometric model. The paper focuses on data from 35 of China’s industrial sectors and covers the period from 2006 to 2014, in order to examine the impact of environmental regulation and technical progress on carbon productivity. Methods applied include panel fixed effect model, panel random effect model and two stage least squares with instrumental variables (IV-2SLS). The effect of environmental regulation and technical progress has industrial heterogeneity. The paper subdivides industrial sectors into capital and technology intensive, resource intensive and labor intensive sectors according to factor intensiveness. The estimation results of the subgroups have uncovered that for capital and technology intensive and resource intensive sectors, environmental regulation has a more significant impact than technical progress; while for labor intensive sectors, innovation more significantly influences carbon productivity. In addition, foreign direct investment (FDI) and industrialization level facilitate improving carbon productivity for the full sample. By contrast, industrial structure inhibits the overall industrial carbon productivity. The industry-specific results indicate that for capital and technology intensive sectors, optimizing of the industrial structure can improve carbon productivity; for resource intensive sectors, FDI and energy consumption structure should be emphasized more; for labor intensive sectors, industrialization levels help enhance carbon productivity. Finally the industrial sector-specific policy suggestions are proposed.
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