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

Abstract

With the introduction of China’s dual carbon goals and the rise of the digital economy as a new model of economic development, the role of the digital economy in achieving green growth is garnering increasing attention. This paper constructs a comprehensive digital economy index, utilizing panel data from 30 provinces in China between 2006 and 2017, and employs the System GMM method to examine the comprehensive impact of the digital economy on low-carbon development from the perspectives of “emission reduction” and “efficiency enhancement”. The primary findings indicate that the digital economy aids China in meeting its dual carbon goals by reducing carbon emissions (CEs) and increasing carbon emissions’ efficiency (CEE). However, this impact varies with different components of the digital economy, and the role of digital finance is limited. This conclusion underscores the necessity of subdividing digital economy indicators. Our conclusions have been substantiated through various robustness checks, including but not limited to the method of distinguishing pure emission reduction from efficiency enhancement. Additionally, our research reveals the dynamic nonlinear effects of the digital economy in promoting emission reduction and efficiency enhancement. Green regulations that exceed a threshold value enhance emission reduction and efficiency, while the impact of sustainable technological innovation may be constrained by changes in policy and market environments. Academically, this study offers a new perspective on the complex relationship between the digital economy and its effectiveness in reducing carbon and enhancing efficiency. From a policy standpoint, it provides insights for China and other countries in advancing energy conservation and emission-reduction initiatives.