The effect of the expansion of information and communication technology on energy consumption with an emphasis on the role of institutional quality

On the impact of information and communication technology (ICT) expansion on energy consumption in a country, previous studies have not yielded consistent results. In this regard, it should be noted that while on a case-by-case basis the deployment of ICT in different economic sectors may lead to a reduction in energy intensity in those sectors (substitution effect), it may not necessarily lead to a reduction in energy consumption. This is due to the influence of ICT expansion on lifestyle and macroeconomic variables such as economic growth, which is generally associated with an increase in energy consumption (income effect). The aim of this research is to assess the role of institutional quality in countries in regard to these contrary effects using regression analysis. To achieve this goal, this study has sought to take a deeper look at the existing challenges regarding ICT expansion and energy consumption. By doing so, we have been able to discuss the transmission channels through which institutional quality can affect the relationship between these two variables. By using data from 75 countries across the period 2011 to 2020, we find that ICT has a positive impact on energy consumption. This is consistent regardless of the level of institutional quality. However, the results show that an increase in institutional quality can improve this relationship. In this study, we divide the countries into two parts according to their economic development level, developed countries and developing countries and estimate this relationship for each group of countries separately. The results obtained are the same as for the whole sample. Institutional quality plays a positive intermediary role in the effect of ICT expansion on energy consumption in both groups of countries. In conclusion, our study emphasizes the importance of institutional quality in shaping environmental outcomes of emerging technologies. In an era where technology is universal, enhancing institutional quality is essential for the advancement of energy efficiency.