Does the development of the digital economy amplify the energy rebound effect in the transportation industry? An empirical test of a theoretical paradox

The rapid development of the digital economy (DE) is widely seen as a catalyst for green transformation in transportation. Yet, its net environmental impact is theoretically ambiguous, due to the potential for an energy rebound effect (RE)—where efficiency gains lower the cost of services and may stimulate additional demand. This study provides a robust empirical test of this theoretical proposition within China's provincial transportation sector (2005–2021). We employ a nested CES production function to quantify the sector-specific RE. Then, using a TEFE model with instrumental variables, we estimate the causal impact of DE development on the RE and disentangle three transmission mechanisms: the substitution effect, industrial upgrading, and resource allocation optimization. Our results confirm a significant RE and show that DE development exerts a net amplifying effect on it. This net effect stems from a dual role: while DE-enhanced resource allocation efficiency offers a mitigating force, it is outweighed by DE's stronger effects in stimulating demand (via substitution) and reshaping economic structure (via upgrading). We further document significant regional heterogeneity in this relationship. By moving from theoretical expectation to empirical verification and mechanistic unpacking, this study offers critical evidence and nuanced policy insights for designing digital strategies that genuinely advance sustainable transportation.