The Moderating Effect of Urbanization on the Link Between Digitalization and Carbon Emissions

¹ Labuan Faculty of International Finance, Universiti Malaysia Sabah, Labuan, Malaysia
² BRAC Business School, BRAC University Dhaka, Bangladesh
³ Institute for Big Data Analytics & Artificial Intelligence (IBDAAI), Universiti Teknologi Mara, Malaysia

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

Over the past two decades, Asia's economic transformation has driven by digitalization and urbanization, and yet its environmental impact remains insufficiently understood. Using panel data from 22 Asian countries between 2000 and 2021, this study investigates whether internet usage influences carbon emissions and whether urbanization (urban population) amplifies this effect. The results reveal that urbanization intensifies the environmental impact of internet usage (digitalization). Testing for endogeneity concerns using a quasi-natural experiment, the results confirm that the moderating effect persists under stable economic conditions; however, the impact is not prominent during crises such as COVID-19. The discoveries emphasize the growing challenge of integrating digital expansion, rapid urban development, and environmental sustainability. More importantly, the study highlights the need for synchronization between environmental engineering strategies and urban planning methods that align with digital infrastructure. This evidence contributes to the debate on sustainable urban transitions in emerging economies and offers insights into how environmental engineering and urban planning can reduce the environmental pressure of digitalization.