Digital Economy and Carbon Emission Reduction: History
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Contributor:
Dong Xue
,
Tongyang Liu
,
Xiaomin Li
,
Xiaolei Zhao

Climate change poses a formidable global challenge, impacting the long-term sustainability of human society. The prosperous development of the digital economy can trigger a comprehensive green transformation from factors of production to productivity and production relationships.

  • digitization development
  • low-carbon development
  • CO2 reduction effect

1. Introduction

Climate change poses a formidable global challenge, impacting the long-term sustainability of human society. The burning of fossil fuels, chiefly responsible for the release of carbon dioxide (CO2), is identified as the primary driver of climate change. In 2021, the total global emissions of greenhouse gases reached an alarming 40.8 billion tons of CO2 equivalent. Among the major contributors, China accounted for 11.9 billion tons of CO2, representing 29.2% of global CO2 emissions. The United States and the European Union followed, contributing 11.3% and 6.6% of global CO2 emissions, respectively [1]. The outbreak of the COVID-19 pandemic has had a significant impact on global CO2 emissions, with China experiencing an average growth rate of CO2 emissions surpassing that of other major economies from 2020 to 2021. Moreover, China’s emissions exhibited a stronger growth trend compared to pre-pandemic levels. Consequently, China’s per capita CO2 emissions have continued to rise, surpassing those of developed and emerging economies in 2021. While China, in November 2021, issued a joint statement with the United States known as the “China-US Joint Glasgow Declaration on Enhancing Climate Action in the 2020s”, reiterating its commitment to peak carbon emissions by 2030 and achieve carbon neutrality by 2060 [2], the reality remains that China’s CO2 emissions persist at high levels, presenting formidable challenges in attaining the carbon neutrality target.
In fact, the “peak carbon emissions” strategy is an essential step towards the “carbon neutrality” strategy, which is the way to achieve a zero-carbon society. In China, as the largest emitter of CO2 globally, the establishment of these goals holds significant importance in fulfilling the objectives set forth in the Paris Agreement. Recent research suggests that the energy revolution and digital revolution, driven by technological advancements and innovative management practices, play a pivotal role in facilitating industrial transformation and the achievement of peak carbon emissions and carbon neutrality [3]. In the era of global digitization, the rise of the digital economy not only presents new opportunities for China’s low-carbon development [4], but also emerges as a promising avenue for realizing peak carbon emissions and carbon neutrality [5]. Particularly in the aftermath of the COVID-19 pandemic, digital transformation has driven recovery and growth across various regions and industries in China. Anchored on data elements, the digital economy can instigate comprehensive green transformations, spanning from factors of production to productivity and production relationships, thus empowering sustainable development [6]. According to data from the China Academy of Information and Communications Technology, China’s digital economy expanded from CNY 22.6 trillion to CNY 45.5 trillion from 2016 to 2021, leaping to second position in the world and increasing from 30.3% to 39.8% of the domestic GDP [7].
The integration of digital technology with China’s economy and society has gradually manifested efficiency and quality advantages. However, further research is needed to determine whether it has the potential to reduce China’s CO2 emissions and demonstrate green and low-carbon advantages. Based on this foundation, it is important to investigate the mechanisms and pathways through which the digital economy can contribute to carbon emission reduction. Moreover, the intertwining of China’s digital divide and regional development imbalances raises the question of spatial heterogeneity in the digital economy’s impact on carbon reduction. Exploring the issues will help clarify the relationship between China’s digital economic development and carbon reduction, facilitating the timely achievement of carbon neutrality goals. Tapscott [8] first introduced the concept of the “digital economy” in his book “The Digital Economy” published in 1996. Subsequently, scholars have enriched the theory of the digital economy from different perspectives. Mesenbourg [9] defined the boundaries of the digital economy, identifying it as consisting of e-commerce infrastructure, e-commerce processes, and e-commerce itself. Negroponte et al. [10] emphasized information on technology’s significant development prospects and application value. Kim et al. [11] defined the digital economy as a special economic form, with its essence being “the transaction of goods and services in an informative form.” This definition captures the primary manifestation of the digital economy but is difficult to quantify. Knickrehm et al. [12] viewed the digital economy as the digital output resulting from digital input. While scholars have different understandings of the digital economy, it can essentially be seen as a collective term for a series of economic activities related to the digital economy [13].
The exploration of the relationship between the digital economy and carbon emissions is in its early stages, with an increasing number of research topics emerging. On one hand, there is a focus on the digital economy itself and its impact on the economy and society. This includes measuring the level of digital economic development, strategic upgrading of business operations due to the digital economy [14], and the role of the digital economy in regional development. On the other hand, there is a focus on examining the relationship between the digital economy and carbon emissions. This involves investigating the potential for carbon reduction through digital technologies and digital industries [15], exploring the relationship between the digital economy and carbon emission performance, analyzing the connection between the digital economy and high-quality industrial development, and examining the regulatory role of innovation factors in the digital economy and carbon reduction [16].

2. Relationship between the Digital Economy and Carbon Emissions

With the frequent occurrence of global extreme climate events, carbon emissions have become an important issue worthy of academic attention. Existing views suggest that urbanization construction [17], economic growth [18], industrial agglomeration, energy demand, and R&D innovation [19] are the main causes of carbon emissions. After clarifying the sources of carbon emissions, we are faced with the challenge of how to solve the problem of reducing carbon emissions. For the agricultural sector, Du et al. [20] argue that agricultural carbon reduction policies can significantly reduce carbon emissions from agricultural production by reducing financial support. For the industrial sector, Li and Xu [21] argue that industries with high-energy consumption and low carbon emissions should adopt a progressive carbon reduction improvement path, industries with low-energy consumption and high carbon emissions should adopt a single breakthrough carbon reduction path; and industries with high-energy consumption and high carbon emissions should adopt a leapfrog carbon reduction path. For the service sector, Hou et al. [22] concluded that 13–19% of carbon flows in China are caused by the service sector’s demand for other sectors, so reducing carbon emissions from the service sector should focus on optimizing the energy use structure of the upstream production sector and increasing the proportion of clean energy usage. In addition, Wang et al. [23] found the contribution of renewable energy to carbon reduction using causality tests and scenario analysis methods, respectively.
In addition, the inhibitory effect of carbon quota and carbon emissions trading system on total carbon emissions cannot be ignored, Shi et al. [24] argued that the difference in carbon quota allocations resulted in different emission reduction effects, among which the historical method had the strongest effect. The carbon quota price and number of enterprises participating in the carbon trading market were the key factors affecting carbon emission reduction. Zhang et al. [25], on the other hand, argued that although carbon emissions trading can substantially reduce carbon emission levels and intensity, it will inhibit the innovation of green technologies in the short term. Zhang et al. [26] and Dong et al. [27] verified that carbon emissions trading can realize the Porter’s effect, furthermore, Zhang et al. [26] also showed that carbon emissions trading can improve the efficiency of regional green development and realize regional carbon equality at the same time, achieving the effect of killing two birds with one stone.
The arrival of the digital economy has further expanded the realization path of carbon emission reduction, and some scholars have begun to explore the impact of digital technology as an emerging productivity on carbon emissions, and their main views can be divided into the following three aspects: The first view is that the digital economy can effectively reduce carbon emissions, and some research findings show that the development of ICT (Information and Communications Technology) and ICT industries can restrain carbon emissions through technical innovation and linkages, industrial transformation, and upgrading channels [28]. Jayaprakash and Radhakrishna [29] investigated the impact of ICT on national sustainable development in 80 countries, Ulucak et al. [30] examined the relationship between ICT and carbon emissions in the BRICS countries with the conclusion that ICT significantly reduced carbon emissions. Maleeki and Moriset [31] used a fixed effects panel model and quantile regression model to confirm that European countries with better ICT infrastructure have lower carbon emission levels by constructing a carbon emission analysis framework. The results show that digital technology can effectively reduce carbon emissions’ intensity.
However, the second view is that the digital economy does not significantly reduce carbon emissions, and some studies have found that ICT cannot have a suppressive effect on carbon emissions because the embodied carbon emissions from ICT construction are much higher than the direct carbon emissions, thus creating a “rebound effect” [32][33]. Furthermore, the development of the digital economy relies on ICT and the Internet, which increases electricity and energy consumption leading to a certain degree of carbon emissions [34]. Salahuddin and Alam [35] studied the relationship between ICT and electricity consumption in the Organization for Economic Cooperation and Development (OECD) which showed that the use of ICT stimulates an increase in electricity consumption. The study by Longo and York [36] further verified the positive relationship shown by ICT penetration and energy consumption, they concluded that ICT is not effective in improving the environment, and even deteriorates it.
The third view is that the impact of the digital economy on carbon emissions is uncertain, Higón et al. [37] and Faisal et al. [38] summarizes the “inverted U-shaped” relationship between ICT and carbon emissions using unbalanced panel data for 142 countries and robust least squares estimation, respectively. Among them, Higón et al. [37] argue that ICT in developing countries brings a higher threshold of carbon emissions than in developed countries but developing countries do not enjoy the same environmental bonus as ICT in developed countries.
In summary, existing studies have explored the digital economy and carbon emission reduction in depth, but the relationship between the two has not yet reached a definite conclusion. The reason for the controversy may be that CO2 is an environmental variable that can move across time and space, which may not necessarily conform to the assumption of “independent homogeneous distribution” in traditional econometric models. Secondly, many scholars only focus on the direct impact of digital technology and the digital industry on carbon emissions but lack the examination of their indirect impact and the interpretation of theoretical mechanisms, while the discussion of the role of mediating variables is also lacking.

This entry is adapted from the peer-reviewed paper 10.3390/su151411441

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