Source Data and Original Code - Y.Z.

Despite growing momentum toward low-carbon development, China has yet to implement a carbon tax, and the potential implications of such a policy remain underexplored. As a widely adopted market-based tool in other economies, carbon taxation is recognised for its capacity to reduce emissions while driving economic upgrading. This study investigates the simulated effects of carbon taxation on industrial structure transformation in China, focusing on the underlying mechanisms from both supply- and demand-side perspectives. Using panel data from 30 provinces over the period 2012–2021, we develop a structural equation model to assess both the direct and indirect pathways through which a carbon tax could affect industrial upgrading. Results show a total effect coefficient of 0.607, comprising a direct effect of 0.128 and an indirect effect of 0.479. Among the transmission channels, the most significant pathway is through human capital accumulation facilitating technological innovation, followed by direct technological upgrading, consumption upgrading, and investment effects. Notably, investment plays a dual role, exerting both direct and innovation-mediated impacts, while human capital and consumption upgrading function primarily through indirect mechanisms. From a policy perspective, these findings suggest that carbon taxation could act as a strategic lever for coordinated improvements across technology, labour quality, and demand structures. Importantly, the study demonstrates that measurable proxies can effectively estimate policy readiness and simulate transmission effects in the absence of an enacted carbon tax. This offers a novel empirical basis for carbon pricing reform and green industrial policy design in large emerging economies.