The pathway of industrial carbon intensity reduction through developing the digital industry in China

Abstract

In order to effectively decrease the industrial carbon intensity in the digital age, this paper explores the pivotal pathway of developing the digital industry in achieving industrial carbon intensity reduction. We firstly propose a theoretical framework based on Grossman and Krueger (1995) to show that the development of the digital industry influences the industrial carbon intensity through the direct/indirect technical, industrial economic structure, and energy mix channels. Then, a novel approach is applied to estimate the degree of digital industry development for China's industrial sector at the provincial level. More importantly, considering that the influencing channels may have a mutual influencing mechanism, unlike previous literature, we lastly construct a structural equation model and use elasticity decomposition analysis to show how digital industry development contributes to China's industrial carbon intensity reduction from a new perspective. Based on China's provincial industrial data covering the period of 2002–2021, the empirical results indicate that the development in the digital industry is quite beneficial in cutting the industrial carbon intensity. This positive role is mainly from the technical channel rather than the structural channels. Additionally, the reduction effect of digital industrialization is significantly greater than that of industrial digitization. Lastly, there is still significant regional heterogeneity.