Can digital finance reduce energy intensity and promote energy security in emerging markets and developing economies?

Purpose While a growing body of literature explores the economic and environmental benefits of digital finance, its impacts on energy intensity and energy security remain insufficiently examined, especially in emerging economies. To address this critical gap, this research study aims to investigate the influence of digital finance on energy intensity and energy security in emerging economies. Design/methodology/approach Utilizing panel data from 2005 to 2021, this study develops a novel composite index of digital finance capturing access, depth, efficiency of financial markets and institutions, and the degree of digitalization in the economy. To deal with endogeneity and specification concerns, the analysis employs three estimation strategies: the Driscoll–Kraay estimator, the system GMM and the Lewbel-IV methods. Findings The findings reveal that digital finance significantly decreases energy intensity and enhances energy security, with these effects remaining robust across various sensitivity checks. Notably, the benefits are more pronounced in fast-growing economies, suggesting that rapid economic expansion may amplify the energy-efficiency gains enabled by digital financial development. Originality/value The contributions of this study are as follows. First, this study develops a novel index of digital finance that captures not only access and usage but also market depth, institutional efficiency, and technological penetration. This multidimensional framework offers a more comprehensive and accurate representation of digital finance within an economy. Second, to the best of the author's knowledge, this is the first empirical research to examine the effects of digital finance on both energy intensity and energy security in emerging economies. The findings demonstrate that digital finance serves as a catalyst for reducing energy intensity and enhancing energy security. Third, this study explores the heterogeneity of these effects by differentiating between fast-growing and slower-growing economies. The results indicate that digital finance has a more pronounced effect on energy intensity and energy security in fast-growing economies. Fourth, the study offers clear and actionable policy implications. If digital finance can simultaneously promote financial inclusion and foster energy sustainability, then policymakers should prioritize investment in digital financial infrastructure as a core component of climate and energy strategies.