How the synergy of government intervention and digital transformation affects carbon emission: evidence from a quasi-natural experiment in China

Abstract

ABSTRACT Digital transformation (DT), government intervention (GI) and carbon emissions (CE) have always been the focus of academic attention, and arguments on the relationship amongst them exist. This study seeks to introduce the degree of political connection and government subsidies (GS) as GI into the relationship between DT and CE at the micro-level and aims to provide a new perspective for resolving previous arguments. By using a difference-in-differences model, the impact of DT on reducing CE is measured by taking a sample of 3925 observations from listed enterprises in China and dividing them according to the following degrees of political connection: none, moderate and high. Results show that DT is effective in reducing CE. Additionally, DT of enterprises with moderate political connections has had the greatest effect on reducing CE, followed by the effect of enterprises with high political connections. The effect of enterprises with no political connections is insignificant. If enterprises with a moderate or no political connections gains more GS, then the negative impact of DT on CE will be stronger. This study provides new evidence that DT reduces CE at the micro-level and presents a new perspective on reaching a consensus by introducing GS and the degrees of political connection.