Digitalization and energy consumption. Does ICT reduce energy demand?

This article investigates the effect of digitalization on energy consumption. Using an analytical model, we investigate four effects: (1) direct effects from the production, usage and disposal of information and communication technologies (ICT), (2) energy efficiency increases from digitalization, (3) economic growth from increases in labor and energy productivities and (4) sectoral change/tertiarization from the rise of ICT services. The analysis combines empirical and theoretical findings from debates on decoupling energy consumption from economic growth and from debates on green IT and ICT for sustainability. Our main results: Effects 1 and 3 tend to increase energy consumption. Effects 2 and 4 tend to decrease it. Furthermore, our analysis suggests that the two increasing effects prevail so that, overall, digitalization increases energy consumption. These results can be explained by four insights from ecological economics: (a) physical capital and energy are complements in the ICT sector, (b) increases in energy efficiency lead to rebound effects, (c) ICT cannot solve the difficulty of decoupling economic growth from exergy, (d) ICT services are relatively energy intensive and come on top of former production. In future, digitalization can only boost sustainability when it fosters effects 2 and 4 without promoting effects 1 and 3.