China is a rising power of the twenty-first century with its brilliant economic performance as a result of the transition to the free market economy model. However, China’s economic development process has caused high environmental costs. For the past decade, China has been the leading country responsible for global carbon dioxide emissions (CO₂). Therefore, determining the dynamics that have a reducing effect on CO₂ emissions in China is very important for the development of sustainable environmental policies. This paper aims to examine the impacts of the institutional structure on environmental sustainability in China. To this end, the study follows the method of cointegration with multiple breaks that produce robust econometric results and consider structural changes. According to the results, (i) the validity of an N-shaped EKC relationship is supported between economic growth and environmental pollution. (ii) Industrialization and trade have an increasing impact on environmental pollution. (iii) Political rights and civil liberties have a reducing effect on environmental pollution. Consequently, this study implies that political rights and civil liberties can make an important contribution to achieving sustainability goals in China.