ICT impact on CO2 emissions – a macro perspective

The threat of climate change is one of the greatest challenges of our time. To reach the Paris Agreement targets, PWC estimates that the world economy must reduce its carbon dioxide equivalent (CO2e) emissions per dollar of income by 6.3% per year until year 2100. At the same time, ICT has drastically changed the way we lead our lives, as well as how societies and economies function. How are these phenomena intertwined? It’s often claimed that ICT has the potential to help reduce CO2e emissions, but has it started to deliver on this promise?

Earlier this year, I had the opportunity to work on a project that focused on these questions as part of my master’s degree in economics at Université Paris 1 Panthéon-Sorbonne, with the support of the Sustainability Research Team at Ericsson Research.

Ericsson is one of several organizations that has carried out extensive research on the carbon footprint of ICT, the environmental impact of its life cycle and its potential to mitigate the impact of human activity on the climate. So far, however, there is no consensus on the macro-level impact ICT has had on CO2e emissions. This was the subject of my project – exploring the comprehensive effects of ICT on CO2e emissions with the support of econometric methods.

Exploring the comprehensive effects of ICT on CO2e emissions

There are three major ways in which ICT can be expected to affect CO2e emissions. The direct effects are mainly caused by energy consumption in production, distribution and use of ICT. Estimates of the direct effects of the global ICT sector amount to 1.4% of overall global CO2e emissions. This is explained in the paper The energy and carbon footprint of the Global ICT and E&M sectors 2010-2015 by Jens Malmodin and Dag Lundén.

The indirect effects of the global ICT sector relate to the impact that ICT has on other sectors of the economy. In a recent paper, Ericsson estimates that ICT could help reduce carbon dioxide emissions by 6-15% by 2030 through smart applications, the increasingly efficient use of energy and dematerialization (that is, digital solutions that replace more energy-intensive solutions).

The third major way that ICT affects CO2e emissions is related to the fact that new technologies cause changes in behavior. As ICT becomes cheaper and more available, we tend to consume more of it. Thus there is a risk that the potential reductions from indirect emissions-reducing effects could be cancelled out by changes in consumer behavior and actually lead to greater energy consumption and therefore greater emissions. This is called the rebound effect.

Applying econometric methods

The key question I posed in my research project was this: Has ICT realized its reduction potential or are the direct effects of use and production, together with any negative behavioral changes they have led to, predominant? To find the answer, I used a macro data set of ICT indicators and CO2 emissions for 130 countries for the years 2000-2016. ICT was measured through the number of unique mobile subscriptions, and CO2e emissions according to national reporting. In the regression analysis that followed, I controlled for other factors that affect emissions and covary with ICT such as GDP, the size of the manufacturing sector and the electricity mix.

Encouraging results

The results show that initially, a higher level of ICT usage (or more specifically mobile subscriptions) is associated with a higher level of emissions. However, when ICT usage reaches high levels, there is a point at which increasing the level of ICT usage is associated with lower emissions. This emission-decreasing tendency can be seen from three years after ICT usage has reached high enough levels. This implies that the initial major investments in the new technologies are associated with higher emissions per subscription, but once fully implemented, the technologies can be used to increase efficiency in use and production, as well as to optimize different societal activities, which will lead to lower emissions both in the ICT sector and in other sectors. The time lag implies that the technological and structural changes that ICT solutions provoke take at least a couple of years to have an effect on emissions. You can refer to my dissertation for further details.

In the sample included in this study, almost all high-income countries and around a fourth of low and middle-income countries had reached such levels of ICT in 2013, and therefore they should have begun to see the emissions-reducing effect of ICT by 2016. As more recent data becomes available, future studies including data beyond 2016 should assess whether the predicted results have been realized and are having lasting effect.