From twin transition to twice the burden? Digitalisation, energy demand, and economic growth

In this paper, we evaluate the potential of digitalisation to drive structural transformations toward a sustainable economy. We apply an index decomposition analysis (IDA) to understand the factors influencing energy demand in a panel of 31 high-income countries from 1971 to 2019. The IDA framework includes four factors related to the scale and sectoral composition of the economy and technical improvements, accounting for the quality of energy flows and actual work potential through useful exergy measures. We first apply the model at the sector level across 16 productive industries to explore cross-sector heterogeneity in the structure of energy demand. Industries are then classified by digital intensity categories, allowing us to compare results across different levels of digitalisation. We find that value added growth is the primary driver of energy use. While digitalisation alone does not fully explain trends in energy demand, it is associated with substantial value added growth in high digital intensity sectors and amplifies the use of energy. This suggests that digitalisation, if unchecked, may in fact exacerbate economic-ecological tensions rather than alleviate them. We discuss the implications of these findings in the context of recent policy actions aimed at accelerating the green and digital- "twin"-transition.