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How Does Artificial Intelligence Change Carbon Emission Intensity? A Firm Lifecycle Perspective

Author

Listed:
  • Wu, Qiang
  • Zhou, Peng

    (Cardiff Business School, Cardiff University)

Abstract

Artificial intelligence (AI) is crucial in achieving the carbon peak and neutrality goals and mitigating climate change. Although previous studies have explored cross-sectional differences in corporate carbon emissions, temporal heterogeneities in firm lifecycles have been overlooked. Therefore, this study investigates the effect of AI adoption on carbon emission intensity over firm lifecycles and the micro-level mechanisms of this effect. This study examines panel data from Chinese listed companies (2010–2021) using a two-way fixed-effects model and the difference-in-differences method. The empirical results demonstrate that AI significantly reduces enterprises’ carbon emission intensity. However, this effect is mainly observed in growth-stage enterprises and not in decline-stage enterprises. The mechanism analysis reveals that AI primarily reduces enterprises’ carbon emission intensity by improving productivity and promoting innovation. The effect on productivity is particularly evident in growth-stage enterprises, whereas the effect on innovation is dominant in decline-stage enterprises. Heterogeneity tests indicate that the effect on state-owned enterprises, medium-sized enterprises, the manufacturing sector, heavily polluting industries, non-high-tech industries, and capital-intensive industries is more pronounced than that on other enterprises. These findings suggest that enterprises should actively adopt AI, and differentiated AI adoption strategies should be formulated based on the needs of enterprises at different lifecycle stages.

Suggested Citation

  • Wu, Qiang & Zhou, Peng, 2025. "How Does Artificial Intelligence Change Carbon Emission Intensity? A Firm Lifecycle Perspective," Cardiff Economics Working Papers E2025/9, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2025/9
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    References listed on IDEAS

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    1. Xiaoyi Li & Qibo Tian, 2023. "How Does Usage of Robot Affect Corporate Carbon Emissions?—Evidence from China’s Manufacturing Sector," Sustainability, MDPI, vol. 15(2), pages 1-16, January.
    2. Liu, Jun & Liu, Liang & Qian, Yu & Song, Shunfeng, 2022. "The effect of artificial intelligence on carbon intensity: Evidence from China's industrial sector," Socio-Economic Planning Sciences, Elsevier, vol. 83(C).
    3. Ping Chen & Jiawei Gao & Zheng Ji & Han Liang & Yu Peng, 2022. "Do Artificial Intelligence Applications Affect Carbon Emission Performance?—Evidence from Panel Data Analysis of Chinese Cities," Energies, MDPI, vol. 15(15), pages 1-16, August.
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    Cited by:

    1. Naser, M.Z., 2026. "When machine learning models retire, decay, or become obsolete: A review on algorithms, software, and hardware," Renewable and Sustainable Energy Reviews, Elsevier, vol. 226(PA).
    2. Yijian Du & Guoming Hao & Honghui Zhu, 2025. "How Does Participation in AI Standardisation Affect the Sustainable Development of Strategic Emerging Enterprises Under the Background of Uncertainty? Evidence from China," Sustainability, MDPI, vol. 17(17), pages 1-21, August.
    3. Lei, Liying & Feng, Hui & Ren, Jingjing, 2025. "Artificial intelligence, human capital and firm-level total factor productivity," Finance Research Letters, Elsevier, vol. 85(PA).

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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