Information & communications technology's influence on co2 emissions & renewable energy consumption and what it means for economic growth

HỒ CHÍ MINHBÁO CÁO TÔNG KẾT ĐÈ TÀI NGHIÊN cứu KHOA HỌC THAM GIA XÉT GIẢI THƯỞNG “NHÀ NGHIÊN cứủ TRÉ UEH ” NĂM 2024 Impact of innovations: Information & Communications Technology's influ

TRƯỜNG ĐẠI HỌC KINH TẾ TP HỒ CHÍ MINH

BÁO CÁO TÔNG KẾT

ĐÈ TÀI NGHIÊN cứu KHOA HỌC THAM GIA XÉT GIẢI THƯỞNG

“NHÀ NGHIÊN cứủ TRÉ UEH ” NĂM 2024

Impact of innovations: Information & Communications

Technology's influence on CO2 emissions & renewable energy

consumption - and what it means for economic growth.

Thuộc nhóm chuyên ngành: 02

TP Hồ Chí Minh, tháng 2/2024

Impact of innovations: Information & Communications Technology ’ s influence

on CO2 emissions & renewable energy consumption - and what it means for

economic growth.

ABSTRACT

This research was conducted with the purpose of delving into the topic of ICT’s

examining the changes on these effects when taking into account the level of financial development (FD) and foreign direct investment (FDI) of a country Subsequently,

from 2010 to 2019 Results yielded from using multiple linear regression models

positive association between ICT and economic growth is found to be reinforced by

Keywords: CO2 emissions, ICT, renewable energy' consumption, economic growth.

2.6 ICT impacts economic growth through CO2 and renewable energy 16

LISTS OF TABLE

LISTS OF FIGURE

Technology

1 Introduction

As modem technology continues to be enhanced with each subsequent invention and innovation, so too does the growing concern about the impact that they

communications technology (ICT) has brought about drastic changes, both in human

behaviors as a whole and subsequently, our environmental conduct (Batisda, 2019;

technological development and is often presented through the matters of renewable

In the interest of gaining a further understanding, we made use of the GMM

method in order to examine the relationships between ICT and CO2 emissions as well

development (FD) and FD1 as differentiation aspects separating country groups

2011)

This study's objective is to determine the impact of ICT on CO2 emissions and

renewable energy In addition, we also study the relationship between ICT and economic growth This research aims at answering the below questions:

RQ3: How do CO2 emissions and renewable energy consumption affect the relationship between ICT and economic growth?

Our research sources information and statistical data from World Bank National

Accounts Data as well as from the International Monetary Fund organization Through sorting and compiling, our database of 1,210 observations from 121 countries from

Through the usage of the regression analysis with GMM method application to

account for possible endogeneity, our findings indicate that increases in ICT development are negatively associated with CO2 emissions while the opposite is found

in its linkage with renewable energy consumption, where the correlation is shown to

add into the existing literature in regards to ICT’s impacts on various factors,

well as renewable energy (Zhike, 2022; Lee, 2023; Talan, 2023) The second contribution is that while there are many instances of factors being considered within

the relationship between ICT and economic growth, there is little to no literature which points out the role of CO2 emissions, renewable energy usage and even the

this relationship with global data

the selected studies and create testable hypotheses Section 3 provides descriptions of data sources, variable definitions, and research techniques The empirical results of the

investigation are reported and discussed in Section 4 Section 5 presents our conclusion and recommendations for future studies.

2 Literature Review

2.1 ICT concept

(Kaware et al., 2015) to empirical studies on sustainable development (Hilty, L M., &

concept of ICT is still a worthwhile interest point for researchers worldwide due to the ever-changing forms in which information technology has taken on in modern times

refers to it as the technological devices and resources that provide the means to

transmit, store, create, share, and exchange information through many different forms

media, and emails Broadcasting channels are also included, taking into account radio,

conferencing Technological staples such as mobile services and satellites are part of

ICT as well

Social Sciences in 2018 states that ICT comprises factors such as telecommunication,

that a different set of four factors make up ICT: Subscriptions to broadband, fixed

much consistency with this research on the matter of ICT, we will use those four

factors to calculate ICT's impact on CO2 and renewable energy in this study

2.2 ICT impact CO2

Recently, there has been a noticeable surge in global attention and a paramount

exponential increase in greenhouse gases, with CO2 being widely recognized as the

Tan el al (2019), CO2 emissions have been identified as the main cause of environmental degradation, leading to various direct and indirect adverse effects

development of countries Moreover, with governments worldwide adopting more

low-emission economies (Reeve & Aisbett, 2022) While numerous approaches have

and investing in nuclear and renewable energy sources (Saidi & Anis Omri, 2020), as

well as increasing forest coverage (Waheed cl al., 2018), the importance of

many aspects of the economy Moreover, numerous studies have investigated the

incorporating ICT in various sectors of the economy, including agriculture, power,

energy, transportation, and finance, contributes to reducing CO2 emissions For

mechanization in various sectors can be advantageous in curbing CO2 emissions.

(Sadorsky, 2012; Salahuddin and Alam, 2015) Based on a report conducted by

a decrease in outdoor activities, resulting in reduced energy consumption and a decrease in CO2 emissions in both developed and developing countries Moreover,

eliminating information asymmetry (Asongu et al., 2018)

through various channels, such as industrial production, energy usage, and the process

environmental degradation However, as the ICT sector further develops, pollution

All ofthese points suggest that a relatively higher ICT can negatively affect and

follows:

2.3 ICT impact renewable energy

heavily emphasized as it is today - where natural resources are gradually becoming

scarcer and climate change impacting every part of human life, countries around the world are paying more and more attention towards sustainability When determining

on which to examine In this study, the fulcrum of examination is renewable energy

consumption, defined by The World Bank (2023) as the energy consumption which is

derived from a renewable source One such source can be from hydroelectric plants,

converting natural kinetic and potential energy from water streams into usable

sources also include solid and liquid biofuels which are biomass produced artificially

and turned into usable, organic fuel (US Department of Energy, 2023)

technological advancement in energy production, resulting in an increasing need for a renewable energy transition This is firmly supported by studies on the relevant topic,

the amount of renewable energy consumed within a country Zhikc cl al (2022)

indicating that each component of ICT contributes to the consumption of renewable

Lee et al (2023) questioned whether ICT is one ofthe driving factors for countries to

Moments Quantile Regression (MMQR) and accounting for country risk Talan et al

that ICT has a positive long-term relationship with renewable energy usage and that

this is significant at all quantiles With these results from prior research, we propose

H2: Renewable energy consumption is positively associated with ICT.

2.4 Roles of financial development

to use, mobilize, and conduct transactions for activities that support production

2016b; Saidi and Mbarek, 2017) Besides, the degree of pollution may also be reduced

through financial development, which makes it possible to provide clean energy projects with simple financing The effect of ICT on CO2 emissions in developing nations is examined by Ozcan and Apergis (2017) The study finds that more ICT use

emissions When ICT interacts with financial development through time, the estimated

(2019) discovered that the connection between ICT and financial development and

considered, we expect that countries with high financial development will strengthenthe negative impact of ICT on CO2 emissions Hence, we propose the following

hypothesis

When it comes to renewable energy consumption, numerous studies have emphasized the critical significance of financial development in supporting the expansion of this industry and the growing demand for renewable energy According

to these studies, a well-developed financial sector can provide cost-effective debt financing for renewable energy projects, and an efficient stock market can channel

Nucu, 2020) For instance, Khan et al (2021) found that financial growth was a

this, Caglar Ct al (2021) underlined that the growth of renewable energy and environmental sustainability is supported by a strong financial factor Shahbaz et al

renewable energy use Additionally, Yu et al (2023) found that ICT and financial growth both favorably affect the usage of renewable energy Surprisingly, their study indicated that the influence of financial development on renewable energy usage is

demonstrated that the growth of the financial industry had a notable impact on the use

of renewable energy, but that this impact was only present in the group ofhigh-income

renewable energy All things considered, we expect that countries that have high

Hence, we propose the following hypothesis

pronounced for countries that have high financial development.

2.5 Roles of Foreign Direct Investment

investigate the effect of ICT and FDI on the environmental condition (Asongu et al.,

to Hanif (2019), FDI triggers environmental pollution in emerging Asian Countries

The development in FDI inflow leads to an increase in unregulated industrial activities that may contribute to the rise of CO2 emissions (Hanif et al., 2019) On the other

hand, it was also found that through the transfer of advanced technology, FDI lowered

emission is incorporated with FDI, there is a lack of research on the interaction between ICT and FDI on the reduction of CO2 emissions (Danish, 2019) According

is explained that knowledge transfer through FDI and communication increases

people's awareness which helps to reduce CO2 Therefore, we hypothesize that:

(Mielnik and Goldcmberg, 2002) Despite mixed results, there is still a lack ofprior

studies that differentiate nonrenewable and renewable energy when investigating the effect of FD1 on energy consumption It was found in the study by Doytch and

Furthermore, according to Mielnik and Goldemberg (2002), there is significant

decreasing consumption of nonrenewable resources This positive relationship

developed countries than the developing ones (Polat B., 2018) It was also slated FDI

reducing energy demand through technology diffusion Therefore, combined with the

impact of ICT on renewable energy consumption, we propose the hypothesis that:

pronounced for countries that have high FDI.

2.6 ICT impacts economic growth through CO2 and renewable energy

The impact of ICT on economic growth has been studied by many prior

facilitates growth through improving the spread of ideas and information, competition,

enterprises Each of the components that we use in ICT was also proved to have a

relationship with economic growth Elgin (2013) used panel data from 152 nations

substantial correlation between internet usage and the shadow economy and that it has

an effect on GDP per capita Czernich (2014) examined the impact of broadband infrastructure expansion on economic growth in a group of 25 OECD nations from

1996 to 2007 According to the author’s findings, a 10% increase in broadband penetration can result in yearly GDP growth of 0.9-1.5% per capita Haftu (2019) research found that increased mobile phone usage contributed considerably to the

emissions, renewable energy consumption, and ICT on economic growth The link between CO2 emissions, GDP, ICT (mobile and internet use), and energy consumption from 1990 to 2015 was examined by Danish et al (2019) The findings showed ICT

reduces CO2 emissions in high- and middle-income economies while increasing them

heterogeneous impact on CO2 emissions for industrialized and developing nations

little effect on CO2 emissions in poor nations The slow Internet speed in

underdeveloped nations might be the cause of the heterogeneous impact Moreover, renewable energy is confirmed to be a key solution to reducing emissions levels

development (Le, Chang and Park, 2020) The cornerstone of all development initiatives, growing electricity consumption, is determined to be a problem that may be

chance to boost growth rates by enhancing manufacturing effectiveness through ICT applications Therefore in this analysis, we proposed the following hypotheses:

H5.1 Low CO2 emissions strengthen the beneficial impact of ICT on economic growth.

H5.2 High renewable energy consumption strengthens the beneficial impact of ICT on

economic growth.

Figure 1 Theoretical framework of ICT impacts on CO2 and Renewable

energy-Figure 2 Theoretical framework of ICT impacts on economic growth

CO2, renewable energy and economic growth Using the conceptual framework, we outlined some elements to be considered, including the control variables

3 Methodology

3.1 Data selection

This study attempts to quantify the impact of ICT development across 121 countries

low- and middle-income countries to help finance investment projects

2021)

stability and monetary cooperation It also facilitates international trade,

countries

To be concluded, it is noted that all of these data variables in this article were gathered

3.2 Measures of variables

3.2.1 ICT

This paper will use four country-level ICT measures from the World Bank

(mobile cellular), fixed broadband subscriptions (broadband), and fixed telephone

subscriptions (fixed_telephone) The measurements provided by the World Bank

The internet usage measures the pereentage of Internet users out of the total population, internet users are individuals who have used the Internet (from any

The mobile cellular subscriptions, which are subscriptions to a public mobile

telephone service that offer access to the PSTN via cellular technology, measure the percentage of internet users out ofthe overall population The indication is applicable

to all voice-enabled mobile cellular subscriptions It does not include subscriptions to

telepoint, radio paging, or telemetry sendees

include subscriptions that give users access to data communications on mobile cellular

networks, including the Internet

fixed telephone lines, voicc-ovcr-IP (VoIP) subscriptions, fixed wireless local loop (WLL) subscriptions, ISDN voice-channel equivalents, and fixed public payphone

subscriptions

3.2.2 CO2 and renewable energy

In accordance with earlier research on carbon emissions, we use the data CO2

dioxide produced during consumption of solid, liquid, and gas fuels and gas flaring In

final energy consumption) which is the share of renewables energy in total final energy

consumption

3.2.3 Control variables

A collection of country-level factors that affect carbon emissions and renewable

(tradeopen), as well as foreign direct investment, which is the net inflows of

population (l_pop) (Hussain et al., 2021; Shobande & Ashongu, 2022) We also

include inflation (inflation)

3.2.4 Interaction

Development Index (FD) which is a ranking of countries on the depth, access, and

Oyinlola 2013) The second variable is Foreign direct investment (FDI) which is the

conventional energy sources This is because financial development, which defines an

economy's strength, is inextricably related to green energy (Al Naqbi & Mezher,2019)

use CO2 and renewable energy as interaction variables

3.3 Model

Renewable energy t = Po + P] ICT J + ^Country Level Control Par. t + Year Fixed Effects + u (2)

ICT implication in a country leads to higher renewable energy consumption, we expect

In addition, a group of control variables is applied and displayed as a single

The control variables include trade openness (tradeopen), foreign direct investment

divided by GDP (fdi gdp), natural logarithm of population (l_pop), inflation

called Fixed Effects is used to account for fixed effects on time

Table 1 Variables definition

National

Accounts Data

emission is lower than average and 0 otherwise

renewableenergy Renewable energy consumption (% of total final energy Same as above

consumption)

highrenewableen

ergy

Dummy variable that equals 1 if the level of renewable Same as above

energy consumption is higher than average and 0

otherwise

mobilecellular Mobile cellular subscriptions (per 100 people) Same as abovebroadband Fixed broadband subscriptions (per 100 people) Same as abovefixed telephone Fixed telephone subscriptions (per 100 people) Same as above

fd Financial Development index is a relative ranking of International

countries on the depth, access, and efficiency of their Monetary Fund

financial institutions and financial markets It is anaggregate of the Financial Institutions index and the Financial Markets index

high fd Dummy variable that equals 1 if the level of financial Same as above

development is higher than average and 0 otherwise

fdi Foreign direct investment, net (BoP, current USS) Same as above

highfdi Dummy variable that equals 1 if the level of financial Same as above

development is higher than average and 0 otherwise

gdp_percapita GDP per capita (current USS) World Bank

NationalAccounts Data

tradeopen Trade openness (% of GDP) is the sum of exports and Same as above

imports of goods and services measured as a share of gross domestic product

fdigdp Foreign direct investment, net inflows (% of GDP) Same as above

Same as abovel_pop Natural logarithm of population

vae Voice and Accountability assesses citizens' capacity to Same as above

choose a government, as well as their freedom of expression, union, and access to a free press

Figure 3: Carbon emissions and ICT over the years (2010-2019)

Figure 3 illustrates the changes in carbon emission and ICT variables from

2010 to 2019 The variables associated with the field of ICTs, such asaverage_internet_usage, average broadband, and average_mobile_cellular, increasedduring this period Notably, the average mobile cellular surpassed other ICT variables, exceeding 100 in 2019, while the averages for internet usage and broadband were above 50 and below 25, respectively However, the average fixed telephone

subscriptions experienced a slight decline Furthermore, the average CO2 levels

dropped from about 4.55 in 2010 to 4.15 in 2019 during the same period This supports our Hypothesis 1 that pollution tends to go down as the ICT sector further

Figure 4: Renewable energy and ICT over the years (2010-2019)

Figure 4 illustrates renewable energy and ICT variables from 2010 to 2019

Similar to Figure 3, the trend of variables associated with the field of ICTs remains

consistent over the same temporal scope Additionally, there is a decline in the

average renewable energy This alignment substantiates our Hypothesis 2, stating thatICT development has led to changes in technological advancement in energy production, resulting in an increasing need for a renewable energy transition

Table 2: Descriptive statistics of variables for the full sample

Notes: Definitions of these variables are available in Table I The overall sample is composed of 1,210 observations of 121

countries from the years 2010 to 2019 The definitions of the variables are provided in Table 1.

within our regression model Based on data collected from a sample of 1,210

respectively While renewable energy has a mean of 31.431%, a standard deviation of

respectively

Table 3 Correlation coefficient matrix

Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) VIF (1) inlcmet_usage

Note: This table provides the correlation coefficient matrix of the main independent variables The sample includes 121 countries over the period 2010 - 2019 The definition

of the variables are provided in Table I * •* and *** denote statistical significance al the 10 % 5 % and I % levels, respectively The definitions of the variables are

provided in Table I.

Table 3 includes the painvise correlation values between independent variables used in this main analysis Notably, in our

model ICT is represented by four main components — the percentage of individuals using the internet in the total population

(internet usage), mobile cellular subscriptions per one hundred people (mobile cellular), fixed broadband subscriptions per one hundred people (broadband), and fixed telephone subscriptions per one hundred people (fixed telephone) is significantly correlated with other variables (p < 0.01) Based on the results, the four variables mentioned earlier that represent ICT arc positively correlated

with trade openness (TRADEOPEN), foreign direct investment as a percentage of GDP (FDl GDP), the natural logarithm of the

world population (LPOP). voice and accountability (PAE), and inflation (INFLATION). Moreover, the correlations among most independent variables are weak (correlations ranging from 0.1 to 0.39) This implies that as the score on one scale changes, the

5.60

1.78 7.87

On the other hand, ICTs are significantly and negatively correlated with

inflation Some variables with correlation strengths ranging from 0 to 0.1 can be

interpreted as independently predicting the value of the dependent variable (CO2 and

renewable energy) Additionally, as mentioned by Brambor et al in a report from

severe problem

Furthermore, an examination of the Variance Inflation Factor (VIF) reveals that

multicollinearity Notably, the mean V1F remains below 5, thereby indicating the

the independent variables Furthermore, according to the results based on their

correlation matrix table, the correlation between variables used in their model is considered weak, and their regression docs not suffer from any multicollincarity problems In summary, the findings in Table 3 show how the independent variables