Assessing the Impact of Digitalization, Tax Revenues, and Energy Resource Capacity on Environmental Quality: Fresh Evidence from CS-ARDL in the EKC Framework

Abstract

This study examines the dynamic relationships between digitalization, environmental tax revenues, and energy resource capacity within the framework of the Environmental Kuznets Curve (EKC), focusing on their combined impact on environmental quality. It employs a cross-sectional augmented autoregressive distributed lag (CS-ARDL) approach, an advanced technique for complex panel data that is specifically designed to address issues of cross-sectional dependence and slope heterogeneity inherent in panel data analysis. The research covers 88 countries, including both low- and middle-income countries (LMICs) and high-income countries (HICs), to understand how digitalization, as a driving force of the Fourth Industrial Revolution, interacts with environmental taxation and energy resource management to affect greenhouse gas emissions. The results reveal distinct effects of environmental taxes and energy capacity on environmental quality, with marked differences between LMICs and HICs. In HICs, technological progress, especially in information and communication technology (ICT), is found to contribute significantly to environmental quality. For LMICs, the effects are less evident, and the findings suggest the need for tailored strategies in environmental policy and energy management. By providing empirical evidence on the differential impacts of digitalization and energy policies in different economic contexts, this research enriches the environmental economics discourse. It highlights the need for policy frameworks tailored to specific contexts that effectively balance economic growth with sustainable development goals, thereby providing insightful implications for achieving the Sustainable Development Goals (SDGs).