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Article Type

Research Paper

Abstract

Digital transformation has become a fundamental element of sustainability strategies across the globe; However, its environmental implications remain inconclusive, particularly in economies that depend heavily on fossil fuels. Although digital technologies can improve energy efficiency, optimize resource allocation, and support low-carbon development, their expansion may also increase electricity demand and energy consumption. This concern is particularly important in the energy sector, which remains the principal source of carbon dioxide (CO₂) emissions in many Arab countries. This study investigates the impact of digital transformation on CO₂ emissions, consequently climate change, in 18 Arab countries during 2018–2024 within an extended STIRPAT framework, emphasizing the role of the prevailing energy structure. Digital transformation is measured using the Arab Digital Economy Index, and the empirical analysis utilizes the two-step System Generalized Method of Moments (System GMM) to address potential endogeneity and unobserved heterogeneity while accounting for the dynamic structure of the data. Post-estimation diagnostic tests and an alternative quadratic specification are used to assess model adequacy and the robustness of the findings. The results indicate that digital transformation is positively and statistically significantly associated with CO₂ emissions. Energy consumption, oil consumption, industrial activity, and population growth are also significant drivers of emissions, whereas imports are statistically insignificant. The robustness analysis provides preliminary evidence that the positive association becomes more pronounced at higher levels of digital development; However, longer time series are required to confirm its nonlinear dynamics. Overall, digital transformation should not be considered as environmentally neutral. Its contribution to climate-change mitigation depends on complementary energy-sector reforms, particularly renewable-energy deployment, improved energy efficiency, electricity-system modernization, and the integration of digital technologies into broader low-carbon strategies. By extending the STIRPAT framework to fossil-fuel-dependent Arab economies, this study provides new empirical evidence for countries pursuing simultaneous digital and energy transitions.

Keywords

digital transformation; Digital Economy; Carbon Dioxide Emissions; Energy Sector; Petroleum Sector; Arab Countries

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