Can digitalization reduce industrial pollution? Roles of environmental investment and green innovation

Industrialized nations have witnessed a decline in environmental quality over the years. The potential of digitalization in mitigating environmental pollution is of significant interest. Drawing on firm-level data from listed Chinese companies between 2010 and 2020, including pollutant and financial metrics, this study investigates the influence of digitalization on industrial environmental pollution. We found that digitalization substantially diminishes the intensity of industrial pollution emissions. These findings hold even after employing instrumental variable tests, substituting the dependent variable with carbon dioxide emissions, and conducting a quasi-natural experiment in intelligent manufacturing. Moreover, our exploration of the underlying mechanisms reveals that the decline in pollution emission intensity attributable to digitalization stems from both structural and technological factors; specifically, it enhances environmental investment and fosters green innovation. The benefits of digitalization in curbing emission intensity are pronounced for firms characterized by lower pollution levels, executive leadership with environmental work backgrounds, heightened capital intensity, and elevated media coverage.