Do artificial intelligence investments improve environmental sustainability? Evidence from the business processes and support services sector

This study examines the long-run relationship between AI-related venture capital investments in the business processes and support services sector and carbon dioxide (CO2) emissions. The analysis was conducted using a panel dataset of 13 countries (Canada, China, Finland, France, Germany, India, Ireland, Israel, Japan, Singapore, Spain, the United Kingdom, and the United States) covering the period 2012-2023. CO2 emissions are used as the dependent variable, while sector-specific AI-related venture capital investments, economic growth, foreign direct investment, and trade openness are included as explanatory variables. The long-run relationships are estimated using FMOLS, DOLS, and the Panel ARDL-PMG approach, while predictive relationships among the variables are examined using Granger causality analysis. The empirical findings indicate a negative and statistically significant long-run relationship between AI-related venture capital investments in the business processes and support services sector and CO2 emissions. The Granger causality results further reveal a bidirectional predictive relationship between sector-specific AI investments and CO2 emissions. These findings highlight the importance for policymakers and businesses of promoting environmentally sustainable AI investments in the business processes and support services sector, with particular attention to energy efficiency and carbon transparency in the associated digital infrastructure.