Policy Note 46: The impact of digitalization onCO2 emissions

Climate protection and measures to mitigate climate change are key topics of public debate both nationally and internationally. Expert reports from the United Nations, among others, have contributed to this. Based on information and communication technologies (ICT), the digitalization megatrend offers considerable potential for improving efficiency and reducing transaction costs in almost all relevant macroeconomic areas.

As a so-called key technology, ICT-based digital applications bring high welfare gains. However, digitalization can also have positive macroeconomic effects on environmental and climate protection. Nevertheless, the negative effects of digitalization are often cited in the public and political debate, particularly with regard to increasing energy and resource consumption.

Due to the constant increase in internet traffic, but also the rising quality requirements, telecommunications companies have been investing in a massive expansion of digital infrastructures (fiber optics, 5G) for years. On the one hand, this goes hand in hand with the consumption of resources and electricity, but on the other hand also with the many positive enabler effects of digitalization at application level. As digitalization is a general trend that encompasses almost all areas of society and economic sectors, nothing can be said a priori about the overall effect of digitalization on resource consumption in general and_{CO2 emissions} in particular in view of the complex and opposing effects - the latter is therefore a purely empirical question.

!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"])for(var e in a.data["datawrapper-height"]){var t=document.getElementById("datawrapper-chart-"+e)||document.querySelector("iframe[src*='"+e+"']");t&&(t.style.height=a.data["datawrapper-height"][e]+"px")}}))}();

Theoretical considerations show that digitalization in some areas can certainly be seen as a driving force and a great opportunity for the path to a more sustainable society with more climate protection. However, there are also increasing warnings against too much hope, combined with references to possible risks due to unforeseeable or unconsidered rebound effects. Reference was also made to the rapidly increasing consumption of resources required for the production and long-term operation of ICT technology.

In principle, the direct effects of digitalization always initially lead to a demand for materials and energy and therefore to a higher environmental impact. However, these are offset by the indirect effects of efficiency gains and positive replacement effects, which can have varying degrees of relevance, as well as the enabler effect, which makes completely new and innovative applications that were simply inconceivable before possible in the first place.

The empirical results of this study essentially correspond to previous empirical studies, according to which the_CO2-reducing indirect effects outweigh the_{CO2-increasing} direct, indirect and systemic effects on average. For fast fiber-based broadband connections, these different impact channels could also be explicitly verified by including supply and demand-side metrics. It was found that, in addition to the decreasing effect for basic broadband services, there was also a decreasing effect for the use of new fiber-based broadband access services and associated service applications. The increase in basic broadband use in Austria in the period 2002-2019 led to a reduction of 7.09 million tons of_{CO2 emissions} in total. In contrast to the indirect effect, the direct effect in connection with fast broadband infrastructures has a positive sign, but is insignificant.

From the empirical analysis, it can be concluded - in broad agreement with the available relevant empirical literature - that blanket policy measures with regard to ICT providers or digitization services would not do justice to the identified heterogeneity of the underlying effects and would therefore be associated with inefficiencies.

For example, existing ICT services - such as broadband access services in particular - have slightly lower_{CO2 effects} overall. In contrast, other areas of the ICT ecosystem will continue to generate high electricity consumption and corresponding negative externalities in terms of the resulting_{CO2 emissions}.

In recent years, for example, there has been a massive increase in internet data traffic in connection with video streaming services. The proportion of total internet usage has risen sharply in recent years and, as a result, the energy and electricity consumption associated with the provision of these services has also increased. According to industry experts, video streaming services and video downloads currently account for well over half of all global internet traffic and this proportion is set to increase significantly in the coming years.

Particularly power-intensive streaming services were therefore accompanied by correspondingly high_{CO2 emissions} in the past, which will become even more pronounced in the medium term. Any regulatory interventions in the complex ICT ecosystem would also have to be coordinated on a selective basis, taking into account the various sectoral interactions.

In addition to interventions aimed at reducing particularly resource-intensive areas of application with high_{CO2 emissions}, it would also be conceivable to promote digital services and ICT areas with overall_CO2-reducing effects. National funding measures would also be conceivable here for those_CO2-reducing areas and service applications where development in general or specifically for Austria is still in its infancy, but could have particularly high potential for_{CO2 reductions} in the medium term.