Assessing the digital economy and its effect on carbon performance: the case of China

With China’s carbon neutrality target and the rapid growth of the digital economy, it is critical to understand how the digital economy can decouple economic growth from carbon emissions. This paper innovatively calculates the digital economy index in China from 2004 to 2019 and explores how the digital economy affects total factor carbon productivity (TFCP) and its spatial spillover effect. The empirical results indicate that (1) the development level of digital economy in eastern provinces is significantly higher than that in other provinces. (2) The digital economy positively promotes TFCP. Interestingly, digital industrialization has a more substantial effect on improving TFCP, while industry digitization has a weaker effect. (3) The digital economy not only helps improve the local TFCP but also has spatial spillovers to the surrounding areas and has the most prominent effect on the TFCP of the northern. (4) The digital economy affects TFCP through four channels industrial digital upgrading, human capital, market integration, and resource allocation. (5) The effects of the digital economy on TFCP exhibit significant heterogeneity in terms of time, region, and pollution degree. The findings of this study have important policy implications for promoting the transition to the digital economy and low-carbon development.