How does enterprise digitalization affect corporate carbon emission in China: A firm-level study

This paper develops a theoretical framework to examine the influence of enterprise digitalization on corporate carbon emissions. Then it empirically measures the extent of digitalization in Chinese enterprises through their share of intermediate inputs to their value added from information and communication technologies. Data from the China Enterprise Tax Surveys and Inter-Country Input-Output Tables from 2007 to 2016 are used for the empirical analysis. It is noted that digitalization in enterprise manufacturing leads to an increase in corporate carbon emissions (CCE). The impact from the service sector, however, is not significant. The exacerbation of CCE is observed primarily among low-leverage enterprises, downstream industries, and firms located in relatively lower-income regions. In accordance with the theoretical model, it is observed that enterprise digitalization intensifies CCE by crowding out investment in environmentally friendly green production and by altering production patterns towards mass production. However, an efficient market mechanism effectively mitigates this exacerbation effect. The findings reveal the misalignment of enterprise digitalization transformation modes with long-term “low carbon” objectives, thereby exposing the need for appropriate policy interventions.