Sowing the seeds of sustainability: Digitalization, renewable energy, and carbon emissions in emerging economies' global value chains

This study explores how digitalization moderates the link between renewable energy consumption and carbon emissions within global value chains across 31 emerging economies from 2001 to 2022. Employing a robust panel data approach, the research utilizes advanced econometric techniques such as fixed and random effects models with Driscoll and Kraay standard errors, and feasible generalized least squares (FGLS) estimators to account for cross-sectional dependence, heteroscedasticity, and autocorrelation. Our findings reveal that renewable energy consumption significantly lowers carbon emissions in global value chains, emphasizing its environmental benefits. However, digitalization shows a dual role, as it improves operational efficiency, its dependence on energy-intensive digital infrastructures contributes to higher carbon emissions. The interaction between digitalization and renewable energy consumption suggests that high levels of digitalization weaken the positive environmental impact of renewable energy. This moderating effect underscores the importance of aligning digital strategies with sustainable energy policies, particularly in emerging economies where the energy mix often relies heavily on traditional sources. This study sheds light on the pollution haven hypothesis by emphasizing the risks associated with technology transfers that lack sufficient backing in renewable energy. The insights offer important policy implications, urging governments to adopt integrated low-carbon strategies.