The impact of digitalization progress on carbon abatement costs: Cheaper or more expensive?

While studies have extensively discussed the energy and environmental impacts of digitalization, its effect on carbon abatement costs remains underexamined. Drawing on city-level data from China, this study uses exogenous change in digitalization generated by the Broadband China pilot policy to examine the impact of digitalization on the marginal abatement cost (MAC) of CO2 emissions. The results suggest that following the enactment of the broadband pilot policy, the MAC of CO2 emissions witnessed a notable decrease in pilot cities compared to non-pilot cities. The mechanism analysis reveals that the digitalization process, exemplified by the development of broadband infrastructure, reduces the MAC by facilitating green technology innovation and factor-biased technological progress. Besides, the heterogeneity analysis suggests that due to the dependency on resource industries, the digital policy has a smaller impact on reducing the MAC of CO2 emissions in resource-based cities. The findings of this study furnish theoretical underpinning and empirical substantiation for low-carbon development during the digital transformation process.