Digital economy to encourage sustainable consumption and reduce carbon emissions

The study aims to empirically analyze the complex interrelationships between the digital economy, consumption upgrading, and carbon emissions across 30 Chinese provinces from 2011 to 2021. Employing spatial econometric approaches, results show that a 1 % increase in the digital economy reduces carbon emissions by 0.082–0.092 %. Findings also determine the digital economy lowers emissions in neighboring provinces. Analyses identify the advancement of the digital economy positively affects consumption upgrading, which then diminishes emissions by 0.738 units. However, this effect significantly varies based on urban versus rural divisions. Non-linear dynamics are uncovered, with the marginal effect of the digital economy intensifying from −0.023 to −0.060 once consumption upgrading surpasses an identified threshold. Promoting digital infrastructure can address disparities, foster sustainable urban consumption, and encourage innovation. The robust methodology substantiates the emissions payoffs from digital adoption and guides sustainability policymaking in other developing countries. As countries worldwide increasingly prioritize environmental sustainability, the study provides insights to leverage the digital economy and manage consumption demand levers in service of emissions mitigation goals.