Global | How do digitalization and decarbonization efforts interact?

Summary

The actual socioeconomic context has reinforced and accelerated a number of global trends, in particular sustainability and digitalization, two of the most disruptive. The empirical study conducted by BBVA Research suggests that an inverted U-shaped relationship exists between digitalization and CO2 emissions.

Key points

• Key points:
• Digitalization is expected to help decarbonization in the medium and long term in low digitized countries, while it is already fostering CO2 emission reductions in highly digitized economies.
• The empirical results suggest an inverted U-shaped relationship between digitalization and CO2 emissions; in early stages of digitalization emissions increase and with further development emissions decrease. That is, specific thresholds of digitalization need to be reached in order to start reducing emissions.
• Once the thresholds are reached, the direct or pure effect of digitalization has the potential to reduce emissions as much as 10% (if catching up to the frontier), while the total effect, which includes energy efficiency gains and easier access to renewables, could be close to a maximum of 45%.
• By 2020, almost 60% of the sample countries were above the direct-effect threshold, while the percentage increases to 70% when considering the threshold for the total effect.

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