Abstract
We first investigate the association between digitalization and CO2 emissions to evaluate the validity of the Environmental Kuznets Hypothesis. Our findings confirm the presence of an inverted U-shaped relationship, indicating that digitalization initially leads to an increase in CO2 emissions until a certain threshold is reached, beyond which carbon emissions begin to decline. Consequently, countries should adopt distinct policies to mitigate carbon emissions as they undergo the process of digitalization. Subsequently, we explore whether high levels of financial development influence the inverted U-shaped relationship between digitalization and CO2 emissions. While the results suggest that financial development may contribute to reducing emissions in less digitally advanced countries, its impact appears to be less significant in highly digitalized nations.
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