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The Jevons Paradox in the AI era: Artificial intelligence adoption for enhancing environmental sustainability at the firm level

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  • Yu, Dongyang
  • Xu, Bingjie

Abstract

This study evaluates the influence of Artificial intelligence (AI) adoption on both carbon emission intensity (CEI) and total carbon emissions (TCE) using firm-level data from A-share listed companies in China during the period 2010–2022. The findings reveal a significant “AI Jevons Paradox”. Although AI adoption significantly reduces CEI, and leads to an increase in TCE. The mechanism analysis of the results indicates that this paradox is driven by three key channels. AI enhances firm productivity and fosters green innovation, which contribute to CEI reduction. AI also significantly boosts firm revenue, and this effect can mediate the positive relationship between AI and TCE. Furthermore, the CEI-reducing effect of AI is stronger in state-owned enterprises and capital-intensive firms, while stricter provincial environmental regulation significantly attenuates the TCE-increasing effect. Notably, AI adoption in high-tech industries is linked to both higher CEI and TCE. These results highlight that the carbon effects of AI have firm-level heterogeneity, and encourage targeted policies to leverage AI to achieve decarbonization and manage its potential rebound effects.

Suggested Citation

  • Yu, Dongyang & Xu, Bingjie, 2026. "The Jevons Paradox in the AI era: Artificial intelligence adoption for enhancing environmental sustainability at the firm level," Economic Analysis and Policy, Elsevier, vol. 90(C), pages 946-966.
    • Handle: RePEc:eee:ecanpo:v:90:y:2026:i:c:p:946-966
    DOI: 10.1016/j.eap.2026.01.060
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