The effects of Internet usage and economic growth on CO2 emissions in OECD countries: A panel investigation

Abstract

This paper estimates the short- and long-run effects of Internet usage and economic growth on carbon dioxide (CO2) emissions using OECD panel data for the period 1991-2012. The Pedroni panel cointegration test confirms that the variables are cointegrated. Although Pooled Mean Group (PMG) estimates indicate a positive significant long-run relationship between Internet usage and CO2 emissions, the coefficient is very small and no causality exists between them, which both imply that the rapid growth in Internet usage is still not an environmental threat for the region. The study further indicates that economic growth has no significant short-run and long-run effects on CO2 emissions. Internet use stimulates both, financial development and trade openness. The findings offer support in favor of the argument that OECD countries can promote their Internet usage without being significantly concerned about its environmental consequences. But the future emissions effect of Internet usage cannot be ruled out, as is evident from the variance decomposition analysis. Therefore, this study recommends that in addition to boosting the existing measures for combating CO2 emissions, OECD countries need to use ICT equipment not to simply reduce its own carbon footprint but also to exploit ICT-enabled emissions abatement potential to reduce emissions in other sectors, such as the power, energy, agricultural, transport and service sectors.