Environmental quality, digitalization and energy efficiency analysis in high income countries

In the last few decades, climate change and global warming have become enduring worldwide issues. These challenges are more prominent in high income countries due to rapid technological advancement and intensive energy use. In this context, digitalization has emerged as a key mechanism for reducing environmental degradation by minimizing excessive energy consumption and improving resource utilization. However, the effectiveness of digitalization remains uncertain, particularly in the presence of energy efficiency. Therefore, this study aims to analyze the impact of digitalization and energy efficiency on environmental quality in high income countries, using panel data and the Generalized Method of Moments (GMM) approach. The study employed the Stochastic Frontier Approach (SFA) to estimate energy efficiency. The results of SFA show that the average energy efficiency for high income countries is 69%, showing that there is still 31% room for further improvements in energy efficiency in the high income nations. Additionally, digitalization and energy efficiency have significantly improved environmental quality in these countries. These findings suggest that targeted policies aimed at improving energy performance, supporting digital transformation, and facilitating environmentally conscious trade can effectively lead to improve environmental quality in high income countries.