Do Digital Transformation and Renewable Energy mitigate CO2 Emissions in SAARC Economies? A Dynamic Panel Data Analysis

Abstract

To cope with the environmental challenges, developed and developing nations are taking different strategies. The application of digital technologies in various systems and the use of renewable energy can be helpful in reducing environmental pollution. Thus, the objective of this research work is to investigate the relationship between digital transformation (DT), renewable energy (RE), and carbon dioxide (CO2) emissions in the South Asian Association for Regional Cooperation (SAARC) nations. To identify how the thing changes in the short and long run, we used a method called the system generalized method of moments (SGMM), after collecting data from 1985 to 2024. The results show that digital transformation and renewable energy reduce CO2 emissions in SAARC nations. However, economic growth and population augment CO2 emissions. To analyze the complex relationship between digital technology and renewable energy in coping with emissions, an interaction term is used. The positive and significant result of the interaction term shows that the positive effect of renewable energy on the environment is hampered as digital transformation is assisted by the generation of energy from fossil fuels. Moreover, the renewable energy consumption and digital transformation are substitutes for abating environmental pollution in the SAARC countries. This research work proposes that the SAARC countries should invest in digital transformation, renewable energy, and other eco-friendly technologies to reduce environmental emissions in the region.