Disentangling the complex impacts of urban digital transformation and environmental pollution: Evidence from smart city pilots in China

Existing studies are mixed about whether smart city construction (SCC) can alleviate urban environmental pollution. This study takes three batches of smart city pilots implemented by the Ministry of Housing and Urban-Rural Development of China as a quasi-natural experiment. We construct the panel dataset of 286 prefecture-level cities in China covering the period 2006 to 2018, then applies the multi-stage difference-in-differences method to investigate the environmental benefits of SCC policies. The results show that SCC can significantly reduce air pollution by 2.6% ∼ 18 %, except for ozone (increase by 13.9%), water pollution by 0.7%∼ 11.8%, and solid waste pollution by 5.8%∼ 19.7%. Meanwhile, SCC policy shows a more prominent reduction effect in eastern cities, megacities, young local officials and regions with high government capacity. The dynamic effect reveals that the environmental benefits take effect after 2∼4 years of SCC implementation, and then the benefit will increase significantly over time. The mechanism tests indicate that although the rebound effect will deteriorate the environmental quality, SCC can reduce pollution through industrial structure optimization and technological innovation. Overall, this finding inspires other emerging economies to solve the dilemma of economic development and environmental governance at the level of new infrastructure construction.