Digital Economy and Carbon Neutrality: Exploring the Pathways and Implications for China’s Sustainable Development

China’s rapid economic growth over the past few decades has significantly increased energy consumption and carbon emissions, making it the world’s largest carbon emitter. However, in 2021, China unveiled ambitious goals to achieve peak carbon dioxide emissions by 2030 and carbon neutrality by 2060, marking a pivotal shift towards a low-carbon future. Concurrently, China’s digital economy has been on the rise, playing a crucial role in the country’s economic development. This research delves into the intricate relationship between digitalization and the journey towards carbon neutrality in China. We investigate whether the development of China’s digital economy can impact its carbon-neutral strategy and, if so, what the underlying economic mechanisms are. Additionally, we explore whether this relationship aligns with the Environmental Kuznets Curve hypothesis. The study also considers the micro-, meso-, and macro-level effects of the digital economy on carbon emissions, emphasizing the importance of industrial structure change, precise monitoring of emissions, and energy supply network transformation. A unique theoretical framework is constructed, focusing on how the digital economy influences the transformation and upgrading of industrial structures and, consequently, carbon emissions. Key contributions of this paper include a multi-dimensional analysis of urban carbon emission reduction through the digital economy, confirmation of the Environmental Kuznets Curve hypothesis in the Chinese context, and insights into the role of industrial structure adjustment in achieving emission reduction. The findings underscore the importance of continued investment in digital technologies for carbon neutrality, integration of digital carbon-neutral management technology in industrial digitization, and the promotion of regional industrial structure development. Moreover, fostering digital collaboration and network infrastructure is crucial for managing regional carbon emissions effectively, aligning with China’s commitment to a sustainable and low-carbon future.