Digitalization, Oil Dependence, and Carbon Emissions: Evidence from a Global Panel

The environmental consequences of digitalization remain contested. While digital technologies may support decarbonization through improved energy efficiency and resource allocation, empirical evidence also points to insignificant or adverse environmental associations. This study investigates whether the relationship between digitalization and carbon emissions varies with countries’ economic dependence on oil rents. Using a panel of 133 countries over 2000–2021, we construct a composite Digitalization Index through principal component analysis and estimate fixed-effects models with interactions across oil-rent dependence groups. The results indicate a negative but marginally significant association between digitalization and CO2 emissions in economies with low oil-rent dependence. The interaction coefficients are positive for moderate- and high-dependence economies, indicating differences relative to the low-dependence reference group; however, the corresponding marginal associations are not statistically significant. The lagged specification yields a statistically significant negative association in low-dependence economies, while the marginal associations in the other groups remain nonsignificant. Several robustness specifications support heterogeneity in the estimated relationships, although the interaction effects lose statistical significance when country-specific linear trends are included. These findings suggest that the environmental association of economy-wide digital connectivity may depend on the economic importance of oil rents, but they do not establish a causal relationship. The study contributes to the digitalization–environment literature by identifying oil-rent dependence as a potential source of cross-country heterogeneity and highlights the importance of considering digital development alongside economic diversification and broader environmental policies.