How does the digital economy drive CO<sub>2</sub> reduction in China? Evidence from a novel decomposition model and scenario analysis

Research background: Increasing CO2 emissions place considerable strain on environmental performance, whereas the digital economy, as a transformative economic paradigm, has been identified as an essential catalyst for mitigating environmental effects. However, the inherent limitations of conventional decomposition models have led previous decomposition analyses to overlook the driving effect of the digital economy on CO2 emissions. Purpose of the article: Examining the impacts of the digital economy within the framework of CO2 emissions disaggregation and subsequently projecting the future pathways of CO2 emissions. Ultimately, the research aims to offer scientific insights and recommendations for achieving low-carbon development through digital economic support. Methods: The actual contribution of the digital economy to CO2 emissions is assessed through a novel Generalized Divisia Index (GDI) model. Further, the Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model is extended to project the CO2 trajectories across distinct scenarios. Findings & value added: The results unveil that the digital economy plays a weaker driving force in cutting CO2 emissions. Carbon intensity and energy intensity within the digital economy show substantial potential to deliver CO2 emission abatement, especially in the provinces of eastern and western regions. The carbon factor is manifested as the main accelerator of increasing CO2 emissions. Under the low-CO2 scenario, CO2 emissions driven by the digital economy will meet the emission goals ahead of schedule, while reductions will suffer constraints in the baseline and high-CO2 scenarios. The findings provide an empirical basis and scientific reference at the factor decomposition level for the digital economy to support CO2 reduction.