Unleashing the Power of the Digital Economy for Environmental Sustainability by Zheng, C., & Ma, S. (2025), whose study examines how the development of the digital economy enhances environmental sustainability in urban contexts, using panel data from 280 Chinese prefecture-level cities (2010–2023), and employs multiple econometric methods.
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Unleashing the Power of the Digital Economy for Environmental Sustainability
Highlights
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Digital economy drives urban green transition via better resource efficiency.
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Industrial upgrade and green innovation mediate digital eco-benefits.
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Government eco-focus enhances the digital economy’s positive impacts.
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Stronger effects in eastern cities require tailored regional policies.
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Robust tests confirm digital economy’s causal role in sustainability.
Abstract
This study investigates how digital economy development enhances environmental sustainability in urban contexts using panel data from 280 Chinese prefecture-level cities (2010–2023) by employing multiple econometric methods. Results demonstrate that digital advancement significantly improves urban environmental efficiency through crucial mediating mechanisms: industrial structure enhancement and green innovation. Government environmental attention positively moderates this relationship, amplifying digital initiatives’ effectiveness. The impact exhibits pronounced heterogeneity across regional and urban hierarchies, with stronger effects in eastern regions and core cities. These findings offer insights into calibrating digital–environmental strategies to diverse development contexts rather than implementing uniform approaches.
Introduction
The unprecedented proliferation of digital technologies has catalyzed a fundamental transformation in urban developmental paradigms, particularly within the context of environmental sustainability (Bibri, 2018a, 2018b; Li et al., 2020; Liang et al., 2025; Xing et al., 2025; Xiong et al., 2024; Dai, 2025). As metropolitan regions increasingly grapple with the dual imperatives of economic advancement and ecological preservation, digital economy development (DIG) has become a pivotal force in reconciling these seemingly divergent objectives (Song et al., 2022; Wan and Shi, 2022; Bu et al., 2025). The intersection of digital innovation and urban sustainability presents a compelling research frontier, particularly in China’s rapidly evolving urban landscape.
The digital revolution, characterized by the pervasive integration of information and communication technologies, has engendered novel pathways for resource optimization and environmental stewardship (Aceto et al., 2019; Wang et al., 2023; Wu et al., 2025; Chen et al., 2025; Liu et al., 2025; Hunjra et al., 2024). These technological advances manifest through various channels, including smart grid systems, intelligent transportation networks, and digitalized environmental monitoring platforms (Feng et al., 2024; Huang et al., 2024; Chen et al., 2024; Dai et al., 2025). However, the mechanisms through which digital economic development influences urban green transformation (GREEN) remain inadequately explored, particularly within the context of China, where urbanization patterns exhibit unique characteristics (Zhu, 2024).
Contemporary scholarship has predominantly focused on isolated aspects of the digital economy’s environmental impact, often overlooking the complex interplay between technological innovation, institutional frameworks, and ecological outcomes. This fragmented approach has resulted in a significant knowledge gap regarding the holistic relationship between digital economic development and urban sustainability. Furthermore, existing literature has insufficiently addressed the influence of industrial structure advancement and green innovation as potential mediating factors in this relationship.
This study addresses these theoretical and empirical gaps through a comprehensive investigation of 280 Chinese prefecture-level cities from 2010 to 2023. Specifically, our research objectives are threefold: (1) to examine the causal relationship between DIG and GREEN, using green total factor productivity as a quantitative metric; (2) to delineate the mediating mechanisms through which industrial structure upgrading and green innovation facilitate this transformation; (3) to analyze the moderating effect of government environmental attention on the effectiveness of digital initiatives in promoting sustainable urban development.
The significance of this research extends beyond academic discourse. As policymakers increasingly recognize the strategic importance of digital transformation for achieving sustainable development goals, our findings offer crucial insights for evidence-based policy development. The results demonstrate that DIG not only catalyzes environmental efficiency but also stimulates technological innovation and industrial upgrading in a virtuous cycle of sustainable urban growth.
This study makes several distinct contributions to the existing literature. First, it provides empirical evidence of the causal relationship between DIG and GREEN, using a comprehensive dataset spanning multiple years and cities. Second, the results illuminate the specific pathways through which digital innovations influence environmental outcomes, offering a deeper understanding of the transformation process. Finally, the study examines the critical role of governmental environmental attention in moderating these relationships, providing valuable insights for policy optimization.
Section snippets
Theoretical review and hypotheses development
The DIG–GREEN nexus is a complex theoretical domain that necessitates the integration of multiple theoretical paradigms. Environmental economics theory provides a foundational framework for understanding how technological advancement can reconcile economic development with environmental preservation. This theoretical perspective indicates that digital technologies can fundamentally alter the environmental Kuznets curve (EKC), enabling cities to increase economic development while simultaneously
Data and sample
This study employs panel data from 280 prefecture-level cities in China spanning from 2010 to 2023. This temporal scope corresponds to a period of significant digital transformation in China’s urban development, and the spatial coverage encompasses diverse regional economic contexts. The primary data sources include the China City Statistical Yearbook, the China Statistical Yearbook, the China Energy Statistical Yearbook, and the China Environmental Statistical Yearbook. The digital financial
Descriptive statistics and multicollinearity analysis
As shown in Table 1, our analysis encompasses 3,920 city–year observations. GREEN efficiency (GREEN_sbm) averages 0.348 (SD = 0.141), with values ranging from 0.159 to 1.025, indicating marked disparities in environmental performance across cities. The results also reveal that DIG has a mean value of 0.342 (SD = 0.116), with a distribution spanning from 0.080 to 0.720, illustrating the heterogeneous nature of DIG across urban regions. Notably, INDUS has a mean of 1.056 (SD = 0.567), indicating
Conclusion
This investigation examines the complex interplay between DIG and GREEN across 280 Chinese prefecture-level cities spanning 2010–2023. Our empirical analysis introduces several substantial contributions to theoretical understanding and policy formulation in this emerging domain.
The baseline empirical findings demonstrate that DIG is a significant catalyst for GREEN. This relationship maintains robustness across diverse model specifications, alternative variable measurements, and multiple
Author statement
Chuang Zheng conceptualised the research and contributed to data analysis.
Sa Ma supervised the study, developed the methodology, and revised the manuscript.
Zheng, C., & Ma, S. (2025). Unleashing the Power of the Digital Economy for Environmental Sustainability. Finance Research Letters, 108027. https://doi.org/10.1016/j.frl.2025.108027
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