Assessing the environmental implications of structural change in middle-income countries: introducing the structural change index

The climate crisis is a critical global issue that demands immediate and collective action from all stakeholders. Researchers are trying to find out the factors that cause the climate crisis and how they can be prevented. This research focuses on identifying the sources of carbon emissions, especially for countries with increasing emissions, which are the main contributors to global warming. Middle-income countries (MICs) pose more of a risk to global climate change because of their rapid industrial development and structural change, which often comes at the expense of environmental quality. This research intends to check out the influence of structural change, institutional quality, population density, and natural resource rent on environmental quality in MIC in the period 2000–2018. We employed method of moments quantile regression (MMQR) and bootstrapped simultaneous quantile regression (BSQR) estimates to obtain long-term effects. The influences of explanatory variables are not uniform across different quantiles of CO₂ emissions. This implies that there are different levels of sensitivity and responsiveness to these variables among different groups of countries. The study’s conclusions demonstrate a trade-off between environmental degradation and structural changes in MIC. It has been determined that, among all the independent variables, only institutional quality has a positive effect on the environment, while economic expansion, the utilization of natural resources, and structural transformation have negative effects. As soon as possible, MICs must move to expedite structural changing and embark on an economic path that would guarantee sustainable development.