ICT diffusion and climate change: The role of economic growth, financial development and trade openness

The study examines the relationship between ICT diffusion and climate change for a global panel of 92 countries for the period 1990 to 2018. The study constructs an index of ICT diffusion through principal component analysis and utilizes estimation techniques such as pooled ordinary least squares, the fixed effects model and the system generalized method of moments with panel corrected standard errors. Our study finds that in general, ICT diffusion mitigates CO2 emissions; however, financial development worsens climatic changes. Moreover, the findings indicate that higher levels of economic growth take care of CO2 emissions for the full sample and developing countries but not for the developed countries. On the other hand, trade openness shows differential impacts for developed and developing countries, suggesting that carbon implications of trade openness depend on the country’s regulatory authority and ecological regulations. The study concludes that trade policies and financial development need to be rationalized for sustainable development. However, ICT diffusion should be encouraged as it leads to the mitigation of CO2 emissions.