Heterogeneous Drivers of Environmental Degradation across Global Economies: A Quantile Analysis

Abstract

The rapid expansion of digital technologies and the transition towards cleaner energy system are reshaping the global environmental landscape. However, the environmental consequences of digitalization remain ambiguous as digital technologies can simultaneously improve resource efficiency and increase energy demand. The study examines the relationship between digitalization, green energy consumption and environmental degradation while accounting for economic growth, foreign direct investment (FDI), trade openness, and inflation. Further, the study employs Method of Moments Quantle Regression (MM-QR) to capture heterogeneous relationships across different levels of environmental degradation using a balanced panel of 105 countries over the period from 2005 to 2023. The findings reveal substantial distributional heterogeneity. Green energy consumption exhibits a negative and statistically significant association with CO2 emissions across all reported quantiles highlighting its consistent environmental benefits. In contrast, digitalization demonstrates a varying relationship which is positive at lower quantiles but becomes negative at higher quantiles suggesting that the environmental benefits of digital transformation become more pronounced among economies with higher levels of environmental degradations. Economic growth and trade openness remain positively associated with environmental degradation across the distribution while the influence of FDI weakens at higher quantiles. Moreover, the study demonstrates the environmental implications of digitalization are not uniform across the countries. Further it advocates quantile specific environmental strategies, greater renewable-energy deployment, and policies that align digital transformation with clean energy infrastructure to support global decarbonization.