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AI Adoption, Carbon Intensity, and Rebound Effect: Evidence from China

Author

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  • Sébastien Houde
  • Wenjun Wang

Abstract

This paper investigates the relationship between AI adoption and carbon emission intensity. Using micro-level data from Chinese firms, we find that carbon intensity decreases following the adoption of AI. The effect is particularly pronounced among large firms, those headquartered in AI hubs, and those in high-carbon intensity sectors. We investigate several mechanisms and find that AI adoption is also associated with increases in energy management processes, green innovation, inventory efficiency, overall productivity, and the share of specialized labor. We find that AI-induced carbon reductions are subject to a large rebound effect of approximately 70%.

Suggested Citation

  • Sébastien Houde & Wenjun Wang, 2026. "AI Adoption, Carbon Intensity, and Rebound Effect: Evidence from China," CESifo Working Paper Series 12803, CESifo.
    • Handle: RePEc:ces:ceswps:_12803
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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