Exploring the carbon rebound effect of digitalization and policy responses: A CDEEEA/CGE based analysis

Abstract

Digitalization offers tremendous potential for low-carbon development in China, yet the carbon rebound effect it triggers remains controversial. This paper develops China's Digital-Economy-Energy-Environment Analysis/Computable General Equilibrium (CDEEEA/CGE) model, which assesses the actual input of ICT and its factor characteristics for the first time. On this basis, the digitalization process of China is modeled based on the endogenous drive of digital industrialization, and the carbon emission effect of digitalization is innovatively decomposed, thereby revealing the formation mechanism of the carbon rebound effect. Research results indicate that in the digital industrialization scenario, through the substitution effect, the share of ICT factor input and the share of the tertiary industry increase, which leads to a favorable performance of carbon intensity (−3.61 % in 2060). However, the extra carbon emissions (256.64 Mt. in 2060) resulting from the output effect and the income effect completely counteract the expected emission reductions (116.4 Mt. in 2060), triggering a backfire effect. Nevertheless, policymakers should not narrowly pursue a low rebound effect, as its essence represents the redistribution of the digitalization dividend. This paper further points out that the complementary environmental policy can largely retain the economic benefits of digitalization while eliminating the environmental impact of the carbon rebound effect. This research offers novel theoretical grounds and practical routes for sustainable development in the digitalization backdrop.