Digitalization and Ecological Footprint: Insights From Renewable Energy Transition and Environmental Governance

Abstract

This study explores the dynamic relationship between digital development and ecological sustainability across 37 Organization for Economic Co‐operation and Development countries from 2007 to 2022. Applying the two‐step system Generalized Method of Moments (SYS‐GMM), the analysis provides robust evidence that digital economy significantly reduces ecological footprint, reinforced by both direct effect and nonlinear characteristics. Observably, enhanced digital infrastructure, particularly through expanded broadband access and digital connectivity, facilitates the deployment of smart technologies, real‐time environmental monitoring, and automation across sectors, thereby improving resource efficiency and lowering ecological pressures. This empirical pattern advances Ecological Modernization Theory by demonstrating that the environmental dividends of digitalization are not automatic but emerge as digital systems evolve from foundational infrastructure and market penetration toward intelligent ecosystems that enable systemic efficiencies, renewable integration, and circular resource flows. Additionally, the findings emphasize the transformative role of energy transition as the principal pathway through which digitalization translates into tangible environmental gains, enabling smarter energy systems, accelerating the shift toward renewables, and amplifying the ecological benefits of digital innovation. However, it uncovers a notable tension: intensified fiscal environmental governance can significantly dampen the positive influence of digitalization on renewable energy transitions, reflecting mismatches between regulatory rigidity and the rapid innovation cycles of digital technologies. Therefore, the study concludes that the ecological benefits of digital transformation are contingent on surpassing developmental thresholds within adaptive institutional and policy environments that align digital expansion with green innovation systems, thus preventing technological lock‐in and ensuring that digital economies evolve into active enablers of sustainability.