Introduction

Carbon neutrality plays a vital role in addressing climate change, as it entails balancing carbon emissions with activities that remove or offset them. The primary aim of achieving carbon neutrality is to limit the rise in global temperatures and reduce the impacts of climate change. To accomplish this, governments, businesses, and individuals must lower their carbon emissions by transitioning to renewable energy, enhancing energy efficiency, and adopting sustainable practices across various industries. Additionally, investing in carbon sequestration projects, such as afforestation and carbon capture and storage, is critical (Becker et al., 2020; Yoshino et al., 2023; Zhou, 2023; Zhao and Rasoulinezhad, 2023). Achieving carbon neutrality requires setting clear emission reduction targets, accurately measuring and reporting emissions, and implementing strategies to offset the remaining emissions (Jin et al., 2023; Hou et al., 2023; Ren et al., 2024).

The digital economy plays a crucial role in driving economic development (Rasoulinezhad and Eksi, 2024) and supporting carbon neutrality goals by promoting innovation, efficiency, and sustainability across various sectors. Digital technologies help optimize energy use, transportation systems, and resource management through data analytics, automation, and smart infrastructure. According to Purnomo et al. (2022), Okpalaoka (2023), and Xia et al. (2024), digital platforms reduce the need for physical travel by enabling remote work and virtual meetings, thus cutting carbon emissions from transportation. Additionally, e-commerce and digital services reduce the environmental impact of traditional operations by streamlining supply chains and minimizing waste (Rong, 2022; Phung et al., 2023; Wang et al., 2024; Zhang et al., 2024; Zhu et al., (2018)). The digital economy also speeds up the growth of renewable energy sources and improves grid optimization, supporting the shift to clean energy.

The Chinese government’s ambitious plans to achieve carbon peak by 2030 and carbon neutrality by 2060 represent significant milestones in the global fight against climate change. These long-term goals signal China’s commitment to transitioning towards a low-carbon economy and reducing its environmental impact. To achieve carbon peak by 2030, China aims to implement stringent emission reduction measures across industries, invest in renewable energy sources, enhance energy efficiency, and promote sustainable development practices. By setting a cap on its carbon emissions, China seeks to limit the growth of its carbon footprint and support global efforts to control temperature rise. Additionally, the target of reaching carbon neutrality by 2060 reflects China’s proactive approach to climate change and its commitment to the objectives of the Paris Agreement. This goal involves balancing carbon emissions with carbon removal or offsetting measures, such as afforestation, carbon capture and storage, and the adoption of clean energy. Reaching carbon neutrality by 2060 will demand significant investments in clean technologies, infrastructure improvements, and policy reforms to transition from fossil fuels to renewable energy sources.

The trajectory of China’s digital economy showcases remarkable growth and influence, reflecting a profound shift in consumer behavior and economic activity. By 2022, China’s digital economy surged to an impressive 50.2 trillion yuan (approximately 6.99 trillion U.S. dollars), marking a substantial increase from 2012’s 11 trillion yuan (CAICT, 2022). This exponential expansion is mirrored in the surge of internet users, nearly doubling over the past decade, with over 1 billion people accessing the internet by 2021. The proliferation of smartphones has been a driving force, with the number of users reaching almost 1.04 billion in 2022 and projected to climb to approximately 1.18 billion by 2026. Even traditional communication methods are witnessing a digital overhaul, with telephone landline users reaching around 173 million by December 2023. E-commerce has emerged as a dominant force within China’s digital landscape, with retail e-commerce sales valued at around 2.68 trillion U.S. dollars in 2022, representing a notable 6.1 percent year-on-year growth. This surge in online retail underscores a fundamental shift in consumer preferences and purchasing habits, with digital platforms becoming integral to commerce and trade (EMarketer (2022)). China’s digital economy not only signifies immense economic potential but also underscores the country’s position as a global leader in technology adoption and innovation. As digitalization continues to permeate every aspect of society and commerce, China is poised to leverage its digital prowess to drive further economic growth and innovation on both domestic and international fronts.

This paper focuses on exploring the intersection of digitalization in economic sectors and the goal of carbon neutralization across Chinese provinces. We aim to investigate how the ongoing digital transformation in various sectors can influence and accelerate efforts to meet carbon neutrality targets. By examining the relationship between digital technologies, economic activities, and environmental sustainability, we seek to identify pathways through which digitalization can support the transition to low-carbon economies at the provincial level in China. Through in-depth analysis and empirical evidence, we aim to highlight the opportunities, challenges, and implications of using digital innovations to advance carbon neutralization initiatives across diverse regional contexts in China.

This paper seeks to make significant contributions to the existing literature by undertaking a comparative analysis of the impact of state investment in digitalization, private investment in digital infrastructure, and the proliferation of ATM payments (serving as a proxy for digital banking) on the carbon neutralization capacity of Chinese provinces. By exploring these dimensions, we aim to provide a nuanced understanding of how different forms of digital investment influence regional efforts towards achieving carbon neutrality.

While our research endeavors to provide valuable insights into the relationship between digital investment and carbon neutralization capacity among Chinese provinces, it is important to acknowledge several primary limitations. Firstly, access to comprehensive Chinese databases may pose challenges, potentially restricting the breadth and depth of our analysis. Additionally, the availability of data for all Chinese provinces may be uneven, leading to potential gaps in our assessment of regional carbon neutralization efforts. Moreover, the quantitative weight of our research vis-à-vis qualitative analysis may vary, potentially influencing the robustness of our findings. Despite these limitations, our study provides valuable insights for policymakers in China looking to determine whether private or public investment in digital infrastructure delivers more substantial benefits for provincial carbon neutralization capacity.

This study is designed to offer a thorough understanding of how digital investment impacts the carbon neutralization capacity of Chinese provinces. Section 2 initiates with an in-depth literature review, analyzing existing research on digitalization, carbon neutrality, and their intersection within regional development contexts. Section 3 lays the theoretical foundation, incorporating key concepts and frameworks to structure our analysis and hypotheses. In Section 4, we provide a detailed account of our research materials, including data sources, variables, and the methodological approaches utilized in our study. Section 5 unveils our findings, shedding light on the varied effects of state and private investments in digital infrastructure on provincial carbon neutralization capacity. Finally, Section 6 offers a summary of our research outcomes, and emphasizing significant findings.

Literature review

The literature surrounding carbon neutralization goals is extensive and multifaceted, reflecting the global imperative to combat climate change. However, within this vast body of research, we can delineate specific groups of studies that focus on the unique case of China. These studies can be categorized into several key themes, each offering valuable insights into the challenges, opportunities, and strategies associated with China’s pursuit of carbon neutrality.

Digital economy and carbon neutralization

The literature on the intersection of the digital economy and carbon neutralization presents a dynamic mix of challenges and opportunities. Several studies highlight the potential of digital technologies in promoting sustainability and reducing carbon emissions across various sectors. For example, Wang et al. (2024) emphasize the role of digitalization in enhancing energy efficiency, optimizing resource management, and supporting the transition to renewable energy sources. Likewise, Dong et al. (2022) and Li and Zhou (2024) argue that digital technologies can empower smart energy systems and help consumers make carbon-reducing choices. However, the literature also points to certain drawbacks and unintended consequences of the digital economy. Yi et al. (2022) and Jiang et al. (2024) warn about the environmental impact of digital infrastructure, including concerns over energy consumption, e-waste, and the carbon footprint of data centers and ICT devices.

Carbon neutralization in China

Research on carbon neutralization in China provides valuable insights into the nation’s efforts to address climate change and transition towards a low-carbon economy. Numerous studies have examined China’s national policies, regional disparities, and technological innovations aimed at achieving carbon neutrality. For instance, Teng et al., (2023), and Xu et al., (2023) analyze China’s carbon neutrality pledges and the potential pathways to meet these targets, highlighting the importance of policy coherence and international cooperation. Additionally, research by Wang et al., (2021) explores the regional variations in carbon emissions and mitigation strategies across Chinese provinces, emphasizing the role of economic development, industrial structure, and environmental policies. Moreover, studies by Zhao et al., (2023), and Kong et al., (2023) delve into the technological innovations and investment trends driving China’s transition to renewable energy sources and low-carbon technologies.

Digital economy in China

Scholarly inquiries into the digital economy in China unveil a dynamic landscape shaped by rapid technological advancements, robust market growth, and evolving regulatory frameworks. Studies have explored various dimensions of China’s digital transformation, ranging from e-commerce and digital payments to technological innovation and industrial upgrading. For instance, research by Hu et al., (2024) investigates the drivers and challenges of China’s digital economy expansion, highlighting the role of government policies, consumer behavior, and digital infrastructure development. Similarly, Peng et al., (2023), and Song et al., (2024) examine the impact of digital platforms on China’s economic growth and employment patterns, shedding light on the emergence of digital ecosystems and platform-based business models. Additionally, studies by Wang et al., (2022), and Cheng et al., (2023) delve into China’s efforts to harness digital technologies for sustainable development, including initiatives to promote smart cities, digital agriculture, and environmental conservation.

Literature gap

Previous studies have extensively examined the intersections between the digital economy and carbon neutrality in China, covering topics such as national policies, regional disparities, technological innovations, and market dynamics. While these studies offer valuable insights into the individual elements of China’s digital transformation and carbon reduction efforts, a significant gap remains in evaluating the direct impact of digital economy variables on the carbon neutrality capacity of Chinese provinces. Specifically, there is a lack of research that systematically analyzes how factors like state and private investment in digital infrastructure, technological adoption rates, and digital platform ecosystems influence carbon emissions and sustainability outcomes at the provincial level in China.

Theoretical background

Chinese provinces exhibit considerable disparities in both ICT development and carbon emissions. Shandong Province stands out as a prime example, being not only the largest energy consumer but also the leading carbon emitter in China. As of 2020, coal consumption constituted a significant 64% of Shandong Province’s energy consumption structure, while clean energy usage lagged behind at a mere 7.4% (Liu et al., 2022). This stark contrast underscores the province’s heavy reliance on carbon-intensive energy sources and highlights the urgency of transitioning towards more sustainable alternatives. Furthermore, the distribution of China’s ICT service industry reveals a concentrated pattern, with key hubs including Beijing, Shanghai, Zhejiang, Tibet, and Guangdong experiencing specialization development trends. Among these, Shanghai and Beijing demonstrate the highest ICT infrastructure speeds, with Shanghai leading at 5.01 Mbit/s and Beijing closely following at 4.39 Mbit/s. Additionally, the proliferation of mobile phones is notably pronounced in these urban centers, with Beijing boasting an average of 157.2 mobile phones per hundred people and Shanghai not far behind with 128 phones per hundred people.

The impact of digitalization on the carbon neutralization capacities of Chinese provinces operates through several transmission channels, each influencing sustainability outcomes in distinct ways.

Digital technologies are crucial in improving energy efficiency and optimizing resource use across various sectors in Chinese provinces. By employing intelligent systems and data-focused approaches, industries can enhance their processes, reducing energy waste while maximizing resource utilization. For example, modern sensors and automated technologies facilitate real-time energy monitoring and management in manufacturing facilities, allowing for rapid adjustments to optimize consumption. Likewise, in residential and commercial settings, smart building systems use data analysis to manage heating, cooling, and lighting based on occupancy and environmental factors, effectively cutting down on energy waste.

In addition, digital platforms enhance the efficiency of supply chains and logistics by optimizing transportation routes and improving inventory management. These advancements help reduce energy use and emissions across production and distribution processes. Furthermore, digitalization supports the implementation of intelligent energy systems, allowing for better integration of renewable energy sources and more effective demand-side management strategies, ultimately helping to lower carbon emissions.

Moreover, digital platforms and data analytics provide enhanced capabilities for monitoring, measuring, and managing carbon emissions, enabling informed decisions and focused actions to reduce environmental impacts. Moreover, the digital transformation of transportation systems and logistics supports sustainable mobility solutions, including electric vehicles and ride-sharing services, which play a significant role in lowering emissions from transportation activities.

Furthermore, the realm of digital innovations extends into critical sectors such as agriculture, forestry, and urban planning, revolutionizing traditional practices and fostering sustainable approaches to land use and resource management within Chinese provinces. In agriculture, precision farming techniques leverage data analytics, remote sensing technologies, and IoT devices to optimize crop cultivation processes, including irrigation, fertilization, and pest control. This precision not only maximizes crop yields but also minimizes resource inputs and reduces the environmental impact of farming activities, thereby contributing to carbon sequestration efforts. Similarly, in forestry, digital tools such as Geographic Information Systems (GIS) and satellite imagery enable the monitoring and mapping of forest ecosystems, facilitating sustainable forest management practices and enhancing biodiversity conservation.

Lastly, in urban planning, digital technologies aid in designing sustainable infrastructure such as green roofs, permeable pavements, and urban forests. These innovations help combat the urban heat island effect, improve air quality, and increase carbon sequestration capacity.

Research empirical framework

The research material section of this paper presents a thorough investigation into the effects of the digital economy on carbon neutralization capacity across Chinese provinces. Covering the period from 2010 to 2021, the study aggregates data from Provincial Economic Yearbooks for 23 provinces. The dependent variable, the carbon neutrality capacity index, is calculated. Key explanatory variables include private investment in ICT infrastructure, state investment in ICT infrastructure, and ATM payments as a proxy for digital banking activities. Additionally, control variables such as population size, total provincial product, and mobile phone usage statistics are considered. Table 1 provides a detailed overview of the variables’ specifics and specifications.

Table 1 Discussion of variables.
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Private investment in ICT infrastructure emerges as a pivotal catalyst in molding the Carbon Neutrality Capacity Index (CNCI), exerting a profound influence on the trajectory of carbon emission reduction initiatives within Chinese provinces. Elevated levels of private investment in ICT infrastructure correspond to an escalation in technological advancement, fostering the development and deployment of innovative tools and solutions geared towards sustainable practices. This heightened technological prowess not only augments the efficiency of existing carbon reduction strategies but also facilitates the emergence of novel approaches tailored to the unique challenges and opportunities prevalent within each province. By leveraging cutting-edge ICT infrastructure, provinces can optimize resource utilization, enhance monitoring and management systems, and streamline processes across various sectors, thereby mitigating carbon emissions more effectively. Moreover, increased private investment in ICT infrastructure fosters an environment conducive to research and development endeavors, stimulating the creation of next-generation technologies with even greater potential for carbon neutrality. Moreover, the prevalence of ATM payments, acting as a proxy for the penetration of digital banking, serves as a barometer not only of a province’s technological preparedness but also of its transition towards low-carbon financial transactions and resource allocation. As ATM transactions increasingly replace conventional cash transactions, they signify a pivotal shift from resource-intensive paper currency systems towards more streamlined, digitized financial interactions. This shift not only underscores the province’s adaptability to modern banking technologies but also signals a broader commitment to sustainability and efficiency. Digital banking platforms inherently facilitate the optimization of financial transactions, reducing reliance on physical infrastructure and consumable resources associated with traditional banking practices. Furthermore, the adoption of digital payment methods promotes financial inclusivity while concurrently minimizing the carbon footprint linked with conventional banking operations, such as transportation and paper usage. Beyond technological determinants, demographic factors play a significant role, with population size acting as a fundamental metric. Larger populations often necessitate more extensive infrastructural development, impacting carbon neutrality endeavors through resource allocation and consumption patterns. Concurrently, the total provincial product serves as a barometer of economic activity, with higher production levels potentially straining environmental resources or, conversely, driving innovation towards cleaner production methods. Finally, the ubiquity of mobile phone users underscores the widespread adoption of digital technologies, representing a significant catalyst in modernizing communication channels and enhancing data-driven decision-making processes. This pervasive adoption of mobile technology holds the potential to profoundly impact efforts towards achieving carbon neutrality within Chinese provinces. By facilitating instantaneous communication and information dissemination, mobile phones enable swift coordination among stakeholders involved in carbon reduction initiatives. Moreover, the utilization of mobile applications and services tailored to environmental monitoring and sustainable practices can empower individuals and organizations to make informed decisions that contribute to carbon mitigation efforts. Furthermore, the accessibility of mobile technology enables real-time data collection and analysis, providing valuable insights into carbon emissions trends and patterns. This, in turn, facilitates the implementation of targeted interventions and policy adjustments aimed at optimizing resource utilization and minimizing environmental impact. Additionally, the ubiquity of mobile phones fosters widespread public awareness and engagement regarding environmental issues, empowering citizens to adopt more sustainable lifestyles and support initiatives promoting carbon neutrality.

In this paper, the estimation process begins with a crucial step of model specification, which forms the foundation for the subsequent analysis. The chosen model framework is a dynamic panel model, wherein Eq. (1) serves as the cornerstone. This equation incorporates lagged dependent variables, strategically positioned to capture the temporal dynamics inherent in the data.

$${y}_{{it}}=\beta {y}_{{it}-1}+{u}_{i}+{v}_{{it}}$$
(1)

Equation 1 delineates the presence of two final parameters on the right-hand side, denoting the time-invariant effect and the random error, respectively. The equation representing the selected variables in this study can be reformulated as Eq. 2.

$${{CNCI}}_{{it}}={\beta }_{0}+{\beta }_{1}{{CNCI}}_{{it}-1}+{\beta }_{2}{{PIICT}}_{{it}}+{\beta }_{3}{{SIICT}}_{{it}}+{\beta }_{4}{{ATMP}}_{{it}}+{\beta }_{5}{{POPSIZE}}_{{it}}+{\beta }_{6}{{TPP}}_{{it}}+{\beta }_{7}{{MPU}}_{{it}}+{u}_{i}+{v}_{{it}}$$
(2)

To assess the coefficients of the independent variables, we employ the two-step dynamic generalized method of moments (GMM). When the cross-section count surpasses the number of time periods, GMM yields superior coefficient predictions with reduced standard errors. Furthermore, the existence of cross-sectional dependency to find the most appropriateness panel stationary test is applied. Additionally, to bolster the credibility of our estimations, we conduct robustness analyses.

Empirical findings

In the preliminary estimation phase, a correlation matrix illustrated in Table 2 was generated to assess multicollinearity. The examination conducted, as depicted in Table 3, indicates the absence of multicollinearity among variables, with none of the coefficients surpassing the critical threshold of 0.5.

Table 2 Matrix of correlation between the variables.
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Table 3 Probable impacts of variables.
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Following that, the Pesaran (2021) CD test is utilized to assess the interconnections among the Chinese provinces. Table 4 presents the results, confirming the presence of cross-sectional dependency within the panel of Chinese provinces.

Table 4 Cross-sectional dependency.
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Building on the results in Table 4, the cross-sectionally IPS (CIPS) method, proposed by Pesaran (2007), is used to assess the stationarity of the series. The findings, presented in Table 5, confirm that the series within the panel exhibit different orders of integration.

Table 5 CIPS analysis.
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Due to the differences in integration orders among the variables, the GMM method is identified as the most appropriate estimation approach. The results of the two-step GMM estimations are presented in Table 6.

Table 6 two step GMM estimation results.
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The results show that a 1% increase in private investment in ICT infrastructure leads to a 0.42% rise in carbon neutralization capacity across Chinese provinces. This highlights the important role that ICT infrastructure investment plays in enhancing the carbon-neutral capabilities of regions. A possible explanation for this relationship is the efficiency gains driven by improvements in ICT infrastructure. Investments in ICT typically lead to better communication, data management, and automation, which help industries optimize resource use and minimize waste, thereby improving the carbon-neutralization process. Moreover, such investments may encourage innovation in clean energy technologies and sustainable practices, further aiding in carbon emission reduction. Additionally, the integration of ICT technologies can enhance the monitoring and management of environmental factors, enabling more informed decision-making to reduce carbon emissions. This finding is supported by studies from Wang et al. (2024), Dong et al. (2022), and Li and Zhou (2024), who have confirmed the positive impact of ICT and digitalization on achieving carbon neutralization goals.

The findings demonstrate a significant association: a 1% increase in state investment in ICT infrastructure corresponds to a 0.27% increase in the capacity for carbon neutralization across Chinese provinces. This relationship underscores the pivotal role of government-driven ICT infrastructure initiatives in bolstering regional carbon neutralization efforts. One plausible explanation for this correlation lies in the broader scope and scale of state-led ICT investment programs. State investment initiatives often encompass comprehensive infrastructure development plans, including the implementation of advanced technologies and the establishment of supportive regulatory frameworks. Consequently, these initiatives can facilitate widespread adoption of sustainable practices and technologies across various sectors, leading to significant improvements in carbon neutralization capacity. Additionally, state-backed ICT investments may foster collaborations between public and private entities, enabling more effective coordination and resource allocation towards carbon reduction initiatives. Moreover, government-led ICT initiatives often prioritize investments in critical areas such as renewable energy integration, smart grid systems, and emissions monitoring technologies, which are instrumental in enhancing carbon neutralization capabilities.

Additionally, the estimation reveals an important finding: a 1% increase in ATM payments results in a 0.09% improvement in the carbon neutralization capacity of Chinese provinces. This unexpected positive impact can be attributed to several factors. First, the widespread adoption of electronic payment systems, such as ATM transactions, reduces reliance on cash, which involves the production and transportation of paper currency—both of which contribute to carbon emissions. By shifting to electronic payments, the carbon footprint linked to currency production and distribution is mitigated, supporting carbon neutralization efforts. Second, the efficiency of electronic payment systems enhances resource utilization and reduces waste. ATM transactions streamline financial exchanges, cutting down on paperwork and manual processes, which in turn lowers energy consumption and associated carbon emissions. Moreover, electronic payment systems promote greater transparency and accountability, potentially aiding the implementation of carbon offset programs and environmental conservation efforts funded through these digital channels.

The coefficients related to population size and total product reveal a significant trend: a 1% increase in population and economic growth in Chinese provinces leads to a reduction in carbon neutralization capacity by 0.43% and 0.36%, respectively. This inverse relationship highlights several key factors contributing to the decline in carbon neutralization capacity. First, rapid population growth puts pressure on natural resources and infrastructure, resulting in increased energy consumption, waste generation, and carbon emissions. The expansion of urban areas and industrial activities to accommodate growing populations further intensifies environmental degradation and carbon emissions, hindering carbon neutrality efforts. Similarly, while economic growth signifies prosperity, it often leads to higher resource extraction, industrial production, and transportation, all of which escalate carbon emissions. Furthermore, economic growth may prioritize short-term gains over long-term sustainability, causing neglect of environmental protection and sustainable development practices. These negative coefficients for population size and economic growth underscore the difficulty of balancing economic development with environmental conservation goals in Chinese provinces.

Lastly, the findings reveal a notable correlation: a 1% increase in mobile phone users corresponds to a 0.61% increase in carbon neutralization capacity within Chinese provinces. This positive relationship can be attributed to several key factors. Firstly, mobile phones serve as essential tools for communication and information dissemination, enabling the rapid dissemination of knowledge and awareness regarding environmental issues and sustainable practices. Through mobile applications, social media platforms, and messaging services, individuals can access information on carbon reduction strategies, environmental conservation initiatives, and sustainable lifestyle choices, fostering greater environmental consciousness and participation in carbon neutralization efforts. Additionally, mobile phones facilitate the adoption of smart technologies and applications that promote energy efficiency, waste reduction, and sustainable transportation practices. For example, mobile-based ride-sharing platforms encourage carpooling and reduce vehicle emissions, while smart home applications enable remote monitoring and control of energy consumption, contributing to overall carbon reduction efforts. Furthermore, the ubiquity of mobile phones enables the collection of real-time data and information on environmental parameters, facilitating more accurate monitoring and assessment of carbon emissions and environmental impacts. This data-driven approach empowers policymakers, businesses, and communities to make informed decisions and implement targeted interventions to enhance carbon neutralization capacity effectively.

The comparative analysis of coefficients reveals intriguing insights: firstly, private participation in investment in ICT infrastructure exerts a more substantial impact on carbon neutrality within Chinese provinces compared to state participation. This observation underscores the effectiveness of private sector initiatives in driving technological innovation and sustainable development. Moreover, within the realm of private and state investments in ICT infrastructure, mobile phone users’ improvements emerge as the most influential factor in enhancing carbon neutrality.

The lower section of Table 6 presents the results of diagnostic tests, affirming the absence of autocorrelation issues within the model. Additionally, the accuracy of the model is validated by the Sargan test.

For the robustness test, we have chosen the top 10 Chinese provinces based on GDP in 2023, as displayed in Table 7. Subsequently, we re-estimate the coefficients using this new sample of Chinese provinces. The findings, reported in Table 8, reaffirm the positive impact of both private and state investment in ICT infrastructure, as well as ATM payment, on the carbon neutralization capacity of the 10 Chinese provinces with the largest economic size.

Table 7 Top Chinese provinces with GDP size.
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Table 8 Robustness check.
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Conclusion and policy recommendations

In summary, this study offers a comprehensive exploration of the interplay between the digital economy and carbon neutralization capacity across Chinese provinces. Spanning from 2010 to 2021, the research draws on data sourced from Provincial Economic Yearbooks covering 23 provinces. The findings illuminate several significant correlations, shedding light on the pivotal role of ICT infrastructure investment, both private and state-driven, in bolstering regional carbon neutralization efforts. Specifically, a 1% increase in private investment in ICT infrastructure corresponds to a notable 0.42% increase in carbon neutralization capacity, underscoring the efficiency enhancements and innovation fostered by advancements in ICT. Similarly, state-led ICT initiatives demonstrate a positive impact, with a 1% increase in state investment corresponding to a 0.27% increase in carbon neutralization capacity. Notably, unexpected positive impacts are observed, such as a 0.09% improvement in carbon neutralization capacity for every 1% increase in ATM payments, highlighting the transformative potential of digital financial ecosystems in mitigating carbon emissions. Conversely, population size and economic growth exhibit inverse relationships, with increases corresponding to reductions in carbon neutralization capacity, indicative of the challenges in balancing economic development with environmental sustainability. Furthermore, the study reveals a significant positive correlation between mobile phone usage and carbon neutralization capacity, emphasizing the role of digital technologies in promoting environmental awareness and facilitating sustainable practices. Intriguingly, private sector engagement in ICT infrastructure investment emerges as more impactful than state participation, further emphasizing the importance of innovation and initiative in driving sustainable development.

At the provincial level in China, implementing effective policies to boost carbon neutrality through the digital economy requires a holistic strategy, as highlighted by this study. Firstly, creating a supportive environment for private sector investment in ICT infrastructure is crucial. Provincial governments can incentivize private companies to invest in advanced technologies and digital infrastructure by offering tax breaks, subsidies, and streamlining regulatory procedures. Promoting public-private partnerships can further encourage collaboration among government entities, businesses, and technology firms to develop innovative carbon reduction and sustainability solutions. Enhancing digital literacy and ensuring broad access to technology are equally important. Governments can facilitate this by supporting digital education initiatives and developing infrastructure to empower individuals and communities to participate in carbon reduction efforts. Finally, integrating digital technologies into current environmental management systems can enhance monitoring, data collection, and analysis, enabling more informed decision-making and effective policy implementation.

The insights gleaned from this paper pave the way for future studies to further enhance our understanding of carbon neutralization efforts within Chinese provinces. Specifically, there is an opportunity to explore the impact of emerging carbon trading markets at the provincial level, such as the Shanghai carbon trading market. Investigating the effectiveness of these markets in incentivizing carbon reduction initiatives and promoting sustainable practices can provide valuable insights for policymakers and stakeholders. Additionally, evaluating the efficiency of provincial-level carbon reduction plans, such as the Tanpuhui initiative in Shanghai, offers an avenue for assessing the effectiveness of targeted interventions in mitigating carbon emissions and driving environmental sustainability.