Green tech or power hog? Digital economy’s double-edged impact on emissions

As nations increasingly rely on digital infrastructure to fuel economic development and environmental monitoring, a new comprehensive review questions whether this very transformation might also be quietly driving up global carbon emissions. A systematic literature review published in Sustainability titled “The Impact of the Global Digital Economy on Carbon Emissions: A Review” provides critical insight into this evolving paradox, revealing that the digital economy’s impact on carbon emissions is anything but linear.

Drawing from 102 peer-reviewed studies between 2000 and 2024, the study highlights three core research themes: the measurement of carbon emissions and digital economy indices, the multifaceted relationship between digital expansion and carbon output, and the mediating mechanisms through which digitalization influences emissions. With global CO₂ levels hitting a record 37.4 billion tons in 2023, the urgency of this investigation cannot be overstated.

Can the digital economy reduce or exacerbate carbon emissions?

The study reveals a deep divide in academic consensus regarding whether digital technology mitigates or amplifies carbon emissions. On one hand, digital advancements, particularly in communication technologies, smart manufacturing, and digital finance, have significantly improved energy efficiency and fostered green innovation. This has enabled countries like China and members of the OECD to lower emissions in select regions and sectors.

For example, panel data from over 100 countries show that digital trade and the adoption of ICT contribute positively to national carbon reduction targets. Micro-level studies further demonstrate that corporate digital transformation enhances operational efficiency and lowers production-related emissions. However, this effect weakens once digital adoption surpasses a certain threshold, suggesting diminishing returns on decarbonization.

Conversely, the review finds mounting evidence that the digital economy can significantly increase emissions due to the energy-intensive nature of its infrastructure, especially data centers and telecommunications networks. Studies conducted in 83 countries confirm that construction and operation of digital systems raise carbon output, particularly in developing economies where power grids are heavily fossil-fuel dependent.

The concept of the “rebound effect” also emerges prominently. While digitalization improves energy productivity, it often stimulates increased demand, negating any initial efficiency gains. Additionally, the proliferation of personal electronic devices and high-speed internet usage contributes to surging electricity consumption, with some models forecasting a long-term rise in emissions despite apparent technological efficiencies.

Is the digital economy–carbon emissions relationship linear?

The study establishes that the interaction between digital growth and carbon emissions often follows a non-linear pattern. Several empirical models, including those based on the Environmental Kuznets Curve, confirm an inverted U-shaped trajectory: emissions tend to increase during early digitalization phases but decline once digital maturity is achieved.

For instance, large-sample research across 72 countries and hundreds of Chinese cities demonstrates that once a critical digital threshold is surpassed - measured by variables like broadband access, e-governance, or digital finance - emissions begin to drop. This is attributed to structural shifts in the economy, where energy-intensive industries are replaced by knowledge- and service-based sectors.

However, the relationship doesn’t stop there. Some models suggest an N-shaped curve, in which emissions rise again at very high levels of digital penetration. This phenomenon has been linked to excessive energy demands for high-performance computing, blockchain operations, and the maintenance of redundant digital systems.

These findings point to the importance of identifying regional thresholds. In developed economies, the tipping point where digital growth starts to reduce emissions is lower, while in developing regions, emissions may continue to rise for longer unless offset by clean energy transitions.

What are the key mechanisms behind the digital economy’s emission effects?

Three mediating mechanisms explain how the digital economy exerts its influence on carbon emissions: energy efficiency, green technological innovation, and industrial structure upgrading.

1. Energy Efficiency Gains: Advanced data analytics, IoT systems, and AI-driven optimization tools allow both governments and corporations to monitor and reduce energy consumption. Studies in OECD countries have shown that increased use of digital platforms correlates with improved energy productivity, though rebound effects remain a concern.

2. Green Technology Innovation: The digital economy drives innovation in clean technologies. Empirical data reveal that digitalization accelerates the development and adoption of renewable energy systems, energy-saving manufacturing processes, and green consumer behavior. In many cases, this innovation indirectly leads to lower carbon emissions through enhanced production methods and eco-conscious policies.

3. Industrial Structural Transformation: As economies digitize, there's a transition from resource-heavy industries to service- and knowledge-based sectors. This shift reduces carbon intensity per unit of GDP. Spatial analysis confirms that regions with strong digital infrastructure see more rapid adoption of low-carbon business models and urban planning initiatives.

The review also emphasizes the role of foreign direct investment (FDI) and urbanization as supplementary factors, suggesting that digital globalization can enhance environmental governance if appropriately guided.

Future research and policy directions

To close existing knowledge gaps, the study recommends refining digital economy measurement systems using machine learning and ensemble algorithms for improved accuracy. It also urges the adoption of remote sensing technologies such as high-resolution satellites and LiDAR systems for real-time carbon monitoring.

Equally important is the need for micro-level analysis. Enterprise-level emission data, currently underused, is essential for carbon trading systems and regulatory interventions. More granular studies would help uncover how digital tools influence firm-level emissions behavior.

Lastly, the authors call for urgent attention to the global digital divide. Disparities in digital access between rich and poor regions could undermine carbon mitigation efforts and worsen economic inequality. Bridging this divide is key to ensuring the digital economy supports inclusive and sustainable development globally.