Does Digitalization Lead to Environmental Sustainability and Energy Efficiency in China?

Abstract

In the past 20 years, there has been an increased focus on the connection between investments in digitalization, environment, and economic growth, however the effects of digitalization on energy efficiency in developing nations have received little attention in empirical researches. therefore, the goal of current research is to study the effect of digitalization on environmental sustainability and energy efficiency in China over 1995-2020. For this purpose, two separate models are formulated with energy efficiency and CO2 emissions as dependent variables and digitalization (measured by ICT technologies) as the explanatory variable. The study applies three time series approaches namely, Dynamic Ordinary Least Square (DOLS), Fully Modified Ordinary Least Square (FMOLS), and Canonical Cointegration Regression (CCR) to empirically estimate the study objectives. The study findings show that ICT plays positive role in promoting energy efficiency and environmental sustainability as coefficient of ICT is negative in both models. It was concluded from the findings that ICT sector has positive implications in terms of energy and environment in China. The study recommends the Chinese government and policy makers to pay attention and device effective policies for promotion of ICT sector in the country.