The role of ICT in energy consumption and environment: an empirical investigation of Asian economies with cluster analysis

Abstract

The development of societies has led information and communication technology (ICT) to play a gradually important role in people's lives, transforming the way societies and economies function. ICTs are often associated with the path to reducing CO₂ emissions; however, do they lead to that path? Or are they themselves a growing source of energy consumption and emissions? The current study estimates the effect of ICT, trade, economic growth, financial development, and energy consumption on carbon emissions in South and Southeast Asian (SSEA) region for the period of 1990-2014. Moreover, the study also tried to validate the environmental Kuznets curve (EKC) hypothesis between GDP per capita and CO₂ emissions. Cluster analysis was used to identify two groups (potential and advanced countries) based on their social development score. The long-run connection between the variables was examined and the long-run elasticities of ICT, financial development, energy consumption, trade, and economic growth with respect to CO₂ emissions were estimated. Besides, individual country-wise long-run coefficients were found. Results show that financial development and ICT deteriorated the environment quality in the SSEA region, suggesting ICT goods and services are not energy-efficient in both potential and advanced countries and that most of the financial investment was made in non-friendly environmental projects, in potential countries. On the contrary, in advanced countries, financial development mitigates CO₂ emissions. In addition, results also confirmed an inverted U-shaped relationship for all the considered three panels such as potential, advance, and full-countries panels, confirming EKC. Causality findings showed a bidirectional causality between CO₂ emissions and energy consumption as well as unidirectional causality from trade, economic growth, financial development, and ICT to CO₂ emissions. Policymakers should be aware of the ICT impact on energy consumption and strengthen the regulation of their manufacture to facilitate the integration of energy efficiency into user routines. Due to the increasing use of standby mode and Wi-Fi assistive devices, the rapid implementation of legislation regulating these technologies to make them more efficient is recommended.

Keywords: Asian countries; CO2 emissions; Cluster analysis; EKC; Economic growth; ICT.