The Environmental Effects of Investing in ICT - Evidence from Sweden

Sammanfattning: The potential of Information and Communication Technology (ICT) to reduce greenhouse gas emissions has been increasingly acknowledged as relevant in intergovernmental policy documents. However, the positive and negative environmental effects of ICTs are widely debated and there is a lack of systematic analysis regarding causal links between ICT and the environment. This paper attempts to bring clarity and to provide empirical evidence to the debate on technologies’ environmental effects, by examining the relationship between ICT investments and carbon dioxide (CO2) emissions using annual industry level data for Sweden in the period 1995 to 2016. The baseline model is a standard two-way fixed effects model. Taking the timing as the source of identification seriously, the model is also extended to include linear time trends for each industry as well as quadratic trends. Finally, this paper also acknowledges the latest developments in how to construct event studies in order to graphically judge placebo and dynamic effects. The results confirm that investments in ICT have a negative effect on emissions. The most credible estimate shows that an increase of a standard deviation of investment in ICT annually in an industry lowers the emissions by 7.5 percentages on average. The events study graphs are also consistent with a causal interpretation, although estimated with a low precision.