Smarter and Cleaner: The Digital Economy and Environmental Pollution

• Published date: 01 November 2022
• Author: Qianqian Wan,Daqian Shi
• Date: 01 November 2022
• DOI: http://doi.org/10.1111/cwe.12446

©2022 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 59–85, Vol. 30, No. 6, 2022 59

*Qianqian Wan, PhD Candidate, School of Economics, Huazhong University of Science and Technology,

China. Email: d201981107@hust.edu.cn; Daqian Shi (corresponding author), Professor, School of Economics,

Wuhan University of Technology, China. Email: sdqmarx2021@whut.edu.cn. This research was supported

financially by the the Funds for the Collaborative Innovation Center for Emissions Trading system Co-

constructed by the Province and Ministry (No. 22CICETS-YB013).

Smarter and Cleaner: The Digital Economy

and Environmental Pollution

Qianqian Wan, Daqia n Shi*

Abstract

The ongoing diff usion of digital technology into socio-economic activity has triggered

hopes of minimizing environmental pollution. This research aimed to investigate the

relationship between the digital economy and the intensity of SO2 pollutant emissions

and to examine the mechanism that explains how digitalization leads to the reduction

of pollutants from the perspective of environmental regulations. We applied th e criteria

importance through intercriteria correlation approach to construct a comprehensive

index system to measure the digital economy in China. Then we examined the

correlation between the digital economy and SO2 pollution intensity. To analyze the

mechanism, we investigated the moderating effect of environmental regulations and

also took macroscopic mechanisms (such as innovation and industrial structure) into

consideration. Our empirical results indicated that the digital economy had a negative

effect on SO2 pollution intensity. The negative impact was greater for medium-sized

provinces with abundant resources in eastern and southern China. We also found that

environmental regulations (e.g., environmental legislation and environmental penalties)

moderated the impact of the digital economy on SO2 pollution intensity, and the same

was true for several macro mechanisms (e.g., innovation, industrial structure, and

labor productivity, etc.). This has implications for how the government implements

environmental regulations in the future.

Keywords: digital economy, environmental pollution, environmental regulation, SO2

pollution intensit y

JEL codes: Q53, Q55, Q58

I. Introduction

Environmental issues are among the most signifi cant economic and social problems of

our times. Difficulties with information increase the cost of environmental protection

Qianqian Wan, Daqia n Shi / 59–85, Vol. 30, No. 6, 2022

©2022 Institute of World Economics and Politics, Chinese Academy of Social Sciences

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but also undermine the validity and authority of environmental regulations (Amore and

Bennedsen, 2016), possibly leading to environmental problems. Meanwhile, traditional

environmental regulations, meant to address pollution-related problems, result in economic

and social costs. This has long been under scrutiny. When digital technologies are applied

to traditional industries, their interaction, intelligence, and instantaneity can improve

the availability of information and increase environmental protection (Higón et al.,

2017). These considerations have generated interest in the environmental impact of the

digital economy. However, there are certain diffi culties with current studies related to

the impact of the digital economy on the environment. Some scholars claim a favorable

effect of digitalization on environmental pollution (Pisano et al., 2015), whereas

others suggest a negative impact (Klimova et al., 2016); still others fi nd no discernible

relationship (Laitner, 2002). Given that the results of previous studies are not conclusive

in this regard, our study intended to find out what kind of impact digitalization has

had on the environment in China. Moreover, the mechanism through which the digital

economy aff ected China’s pollutant emissions should also be taken into consideration .

It is diffi cult to determine whether the digital economy has a positive or negative

impact on the environment by considering only its direct impact. In particular, digital

technologies provide a platform for sustainable and interactive policy engagement,

which may act as a moderator of the relationship between the digital economy and

environmental pollution. We therefore structured a theoretical framework of the

digital economy’s environmental impact with reference to three central aspects: the

government’s real-time pollution monitoring, the public’s supervision and reporting

of the pollution, and green technological innovations by fi rms (Figure 1). Specifi cally,

the government can monitor polluting firms digitally in real-time and implement

stricter measures to reduce environmental pollution. Moreover, digitalization promotes

the engagement of the public in supervising and reporting polluting behaviors to the

Figure 1. Conceptual framework of the digital economy’s impact on environmental pollution

Source: Authors.