How does artificial intelligence affect manufacturing firms' energy intensity?

This paper investigates the effects of artificial intelligence (AI) on manufacturing firms' energy intensity (EI) by examining the substitutive role of AI in factor inputs. We assess how AI advancements and the assimilation can improve productivity and enhance energy efficiency, potentially reducing EI. Using a dataset of Chinese listed manufacturing companies from 2006 to 2020, this study quantifies AI adoption through text analysis of firms' annual reports. The findings indicate that AI applications can significantly improve production efficiency and energy efficiency, thereby significantly diminishing firms' EI. This trend is more pronounced for private sector companies and for firms in cities not included in the smart city pilot project. The study concludes with policy recommendations to advance energy conservation and emissions reduction. • The adoption of artificial intelligence (AI) technologies is negatively associated with manufacturing firms' energy intensity (EI). • AI affects EI by improving productivity and energy efficiency. • The impact of AI technologies on EI varies by firm and region, being more significant in private and non-smart city firms. • Analyzing the role of AI in China's manufacturing offers insights into the green transition of the manufacturing sector.