China’s Digital Economy: A Dual Mission of Carbon-Emission Reduction and Efficiency Enhancement

By inergency On Mar 12, 2024

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1. Introduction

With the increasing urgency of global climate change challenges, low-carbon development strategies have become key to addressing the greenhouse effect worldwide [1,2,3]. Particularly in China, since the 2009 Copenhagen Climate Change Conference, the government has actively committed to reducing carbon emissions, aiming to peak carbon emissions by 2030 and achieve carbon neutrality by 2060 [4,5]. This is not only an intrinsic requirement for China’s sustainable development but is also a proactive response to global climate responsibilities. However, the transition from policy to practice involves navigating through multiple challenges including technological, economic, and societal barriers, highlighting the pressing issue of how to effectively advance low-carbon transformation and enhance carbon-emission efficiency.

Meanwhile, the digital economy, as an innovative economic development model, provides a new perspective for sustainable development strategies [6,7]. According to the “2022–2027 China Digital Economy Market Demand Forecast and Development Trend Outlook Report” released by the China Business Industry Research Institute, the market size of China’s digital economy reached CNY 50.2 trillion in 2022, accounting for 41.5% of the GDP. The report also predicts that the market size will increase to CNY 63.8 trillion by 2024. These figures indicate that the digital economy has become a key driver in China’s economic transformation and sustainable development [8]. In contrast, previous research has mainly focused on the drivers and constraints of low-carbon development under traditional economic conditions, such as economic growth [9,10], industrial structure [11,12,13], energy structure [14,15], technological progress [16,17], and environmental regulation [18].

Currently, the academic community has not yet reached a consensus on the complex relationship between digital economy and carbon-emission efficiency (CEE), the transformation of resource utilization patterns, and the association of digital economy with carbon emissions (CEs) [19,20,21]. Studies by Ma et al. [22] and Li et al. [23] suggest that the digital economy, by optimizing energy structures, increasing R&D investments, and promoting technological innovation, effectively reduces CE, thereby fostering the development of China’s low-carbon economy. Particularly, digital economic platforms centered around big data and cloud computing contribute to reducing energy consumption per unit of carbon emissions by enhancing the efficiency of resource allocation [24]. This view is supported by the research of Zhang et al. [25] and Chen et al. [26], which indicates a significant impact of digital economy development on improving energy efficiency. However, Raheem et al. [27] point out potential adverse side effects in the process of promoting emission reduction due to digital development. This study primarily analyzes the high energy-consumption challenges faced during the establishment of digital economic infrastructure and highlights limitations in the adoption of innovations within the digital economy. These issues could limit the potential of the digital economy in reducing emissions [28,29,30].

Current research exhibits significant limitations, particularly in understanding the depth and breadth of the complex interaction between the digital economy and sustainable development. In reality, achieving peak carbon emissions and carbon neutrality are two phases of the same goal. Actively promoting the low-carbon transition driven by the digital economy requires simultaneous consideration of both reducing CEs and enhancing CEE. Moreover, current studies mainly focus on exploring the impact of digital economy development on CEs through mediating effects [22,31], or investigating the spatial effects and regional heterogeneity of CEs [21,32,33]. However, simultaneously examining carbon emission’s dynamic changes and potential nonlinear effects from both perspectives has not yet received sufficient attention.

Examining global trends, countries typically encounter a stabilization phase in carbon emissions after reaching a peak. This plateau’s characteristics and duration vary, underscoring the complexities of transitioning to lower emissions. Despite the potential of emission-reduction technologies like carbon capture and negative emissions, their practical application faces uncertainties and challenges, including technological, economic, and societal barriers [34]. Our study investigates the digital economy’s capability to enhance both the “quality” of emission reductions—ensuring their effectiveness and sustainability—and their “quantity” or scale. This investigation is crucial for assessing the digital economy’s role in expediting China’s progress towards a carbon peak and fostering a low-carbon economy transition. Addressing these questions, we consider not only the development of digitalization itself but also incorporate green regulations and sustainable technological innovation into our research. In essence, the strengthening of environmental regulations may increase operational costs for businesses [35], affecting their motivation to reduce emissions, while the advancement of sustainable technological innovation might enhance the technical capability and efficiency of businesses in emission reduction [36,37].

To address these issues, our study makes marginal contributions in the following aspects. Firstly, our study approaches the analysis of the digital economy’s impact on emission reduction and efficiency enhancement from two dimensions: the quantity and efficiency of carbon emissions. We incorporate these aspects into our framework and further eliminate any overlapping effects between these two paths to accurately assess the true “emission reduction” and “efficiency enhancement” effects. This approach enriches the current theories related to digital development and sustainable development. Secondly, we delve further into the specific impact of four core components of the digital economy on China’s low-carbon development. We recognize that the digital development indicators of economies are multidimensional and complex concepts, and a single indicator is insufficient to fully measure their level of development. The analysis results indicate that China’s digital finance has produced unexpected environmental side effects. Lastly, employing a dynamic threshold model, our study discovers that with the strengthening of green regulations and innovation in sustainable technologies, the impact of the digital economy on reducing carbon emissions and enhancing efficiency exhibits significant dynamic nonlinearity. This finding is crucial for formulating effective environmental policies and promoting innovation in clean technologies. The practical value of our research lies in providing insights for policymakers on how to leverage digital development to foster green growth, emphasizing the need to consider green regulation and technological innovation in tandem while advancing the digital economy, to maximize its role in low-carbon transformation.

The structure of our study is as follows: Section 2 proposes research hypotheses through a review of the existing literature; Section 3 introduces the research methods and data used; Section 4 discusses the empirical results; Section 5 provides further discussion; and finally, the study concludes with a summary of findings and policy recommendations.

6. Conclusions

The objective of this study is to analyze panel data from 30 provinces in China from 2006 to 2017, to construct a comprehensive digital economy index, and to explore the overall impact of the digital economy on low-carbon development using the System GMM and Dynamic Threshold Panel Model methods. We focus particularly on whether the development of digitalization promotes China’s green development by reducing carbon emissions and increasing carbon productivity, as well as the roles of institutional and technological factors in this process. Through an analysis from the perspectives of “emission reduction” and “efficiency enhancement”, combined with an in-depth study of the components of the digital economy, we draw the following main conclusions:

(1): The Contribution of the Digital Economy to Dual Carbon Goals: Our research findings illuminate the significant role of digital development in reducing carbon emissions (−0.07) and enhancing carbon-emission efficiency (0.042). Digitalization aids in minimizing unnecessary resource consumption and supports the establishment of more sustainable production and consumption patterns through improved energy-utilization efficiency and market transparency. This emphasizes the importance of deepening the understanding and utilization of the digital economy’s potential in the global effort to mitigate climate change and promote sustainable development;
(2): The Role of Digital Economy Components: Components such as digital infrastructure, innovation capabilities, application degrees, economic growth, and internet employment reveal their beneficial contributions to reducing emissions and enhancing efficiency. However, the nuanced findings regarding the digital inclusive finance index highlight its constrained impact on environmental objectives. This discrepancy suggests that efforts to foster social and economic inclusiveness through digital means may not automatically translate into environmental benefits, possibly revealing unintended environmental side effects. This observation calls for a more granular examination of how different facets of the digital economy interact with environmental outcomes. It underscores the importance of dissecting the digital economy’s influence on environmental variables to tailor more effective and comprehensive policy interventions;
(3): The Nonlinear Impact of Green Regulation: The nonlinear impact of green regulation becomes apparent when the level of gr exceeds a threshold of 0.763, at which point the digital economy’s role in reducing CE shifts from positive to negative. This suggests that overly stringent regulations may inadvertently lead to higher operational costs, hindering CE control efforts. The observed nonlinear relationship emphasizes the need for a balanced and carefully calibrated approach to formulating and implementing green regulations;
(4): The Role of Sustainable Technological Innovation: With the enhancement of sustainable technological innovation levels, the digital economy plays an increasingly significant role in improving CEE—from 0.019 to 0.035. For CE, it is advised that low-carbon development policies fully consider the multifaceted role of green innovation, encouraging and supporting the research and application of green technologies, and creating a conducive policy and market environment for green products and services.

These findings offer valuable perspectives for policymakers, especially in formulating policies that integrate digital transformation with environmental sustainability. To maximize the environmental benefits of digital development, policies aimed at enhancing technology access, fostering innovation, and supporting the development of sustainable digital solutions are needed. Specifically, to do the following:

(1): Strengthen the construction of digital infrastructure and create digital demonstration zones. By implementing a series of measures such as industrial digitalization, governance digitalization, and service digitalization in these areas, the advantages of the digital economy in promoting green development can be fully utilized;
(2): To optimize the environmental impact of the digital economy, it is essential to conduct targeted research that informs policy adjustments. Policymakers should prioritize studies on the specific effects of digital economy segments, including digital finance, on sustainability. This research should guide the development of adaptive policies that both support digital inclusiveness and address potential environmental side effects. By fostering a dynamic policy environment that evolves with emerging findings, we can ensure that the digital economy advances economic, social, and environmental goals in unison;
(3): To harness the digital economy’s potential for environmental benefits effectively, policies should aim for a balanced approach that identifies the optimal level of green regulation. This balance should encourage emission reductions without imposing significant financial burdens on businesses. Alongside, providing targeted support for businesses—especially SMEs—through financial incentives and technical assistance is crucial. This integrated strategy ensures regulations are both effective and adaptable, facilitating a smooth transition towards greener practices and sustainable growth;
(4): Governments should create a supportive ecosystem that incentivizes the development and application of green technologies. This can be achieved by combining financial incentives (such as tax breaks and grants), fostering public–private partnerships for research and development, and creating favorable market conditions for green products. Additionally, adjusting regulatory frameworks to encourage the adoption of sustainable technologies and providing platforms for knowledge exchange can significantly accelerate green innovation. This integrated approach aims to reduce barriers to investment in green technologies, encourage collaborative innovation, and ensure a market that rewards environmental sustainability;
(5): We recommend that governments and financial regulatory bodies establish stricter standards for disclosure and transparency, and implement dynamic regulation and continuous evaluation mechanisms. Such measures aim to provide more objective and fair information, ensuring that green financial resources are truly directed towards projects with a positive environmental impact.

It is important to acknowledge that our study’s scope is limited to a macro-level analysis within a specific national context, without international comparisons. However, the implications of our findings still hold significant relevance, especially for countries actively pursuing low-carbon development strategies. Future research can broaden the scope of this research with the following guidelines: further refine digital economy indicators to more accurately understand and quantify the specific impacts of digitalization on the environment; and develop and improve economic models to better capture the threshold effects of green technology innovation, including the prediction of diminishing marginal benefits and market saturation points.

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