Digitalization for Decarbonization? Evidence from Belt and Road Initiative Countries

Abstract

The rapid expansion of the digital economy presents significant opportunities for environmental sustainability, although its implications for carbon emissions remain uncertain, particularly in economies experiencing rapid industrialization and increasing energy demand. This study investigates the relationship between digital economy development and carbon dioxide (CO₂) emissions across Belt and Road Initiative (BRI) countries, emphasizing the roles of technological innovation, industrial structure, regulatory quality, financial development, and demographic conditions. Using panel data from the World Bank's World Development Indicators and Worldwide Governance Indicators, the study employs two-step difference and system generalized method of moments (GMM) estimators to account for emissions persistence and potential endogeneity. The findings reveal a significant negative association between digital economy development and CO₂ emissions, although individual digitalization indicators exhibit heterogeneous environmental effects. Technological innovation and industrialization are positively associated with emissions, suggesting that technological advancement and structural transformation do not automatically ensure environmental improvements. Furthermore, regulatory quality and financial development strengthen the negative relationship between digitalization and emissions, whereas demographic conditions influence its magnitude. The analysis also identifies a negative association between the composite digital economy index and energy consumption, highlighting potential efficiency benefits alongside differences across digital technologies. These findings underscore the importance of integrating digital transformation with environmental regulation, green innovation, sustainable industrial development, and renewable energy investment. The study contributes to the literature by providing a multidimensional assessment of the digital economy–carbon emissions nexus and identifying institutional and structural conditions relevant to sustainable digitalization in BRI economies.