Digitalization and Environmental Performance: The Mediating Role of Industrial Structure in BRICS + Countries

Abstract

The rapid expansion of the digital economy is driving transformation in economic and industrial landscapes worldwide, while its impact on environmental performance remains a matter of debate. Therefore, this study examines the relationship between digitalization and environmental performance in BRICS+ countries over the period 2000–2024, with a particular focus on the mediating role of industrial structure. Digitalization is measured using two distinct indicators: digital infrastructure (DINF) and digital connectivity (DCO). The empirical analysis employs a two‐way fixed‐effect model with Driscoll‐Kraay (DK) standard errors as the baseline estimator, while panel threshold estimation is used to examine nonlinear effects across different levels of industrial development. Furthermore, the Feasible Generalized Least Squares (FGLS) and Panel‐Corrected Standard Errors (PCSE) estimations are employed as robustness checks. The results indicate that DCO is positively and significantly associated with environmental performance, whereas DINF does not exhibit a significant effect. The mediation analysis further reveals that industrial structure partially mediates the relationship between DCO and environmental performance, whereas no significant mediating effect is observed for DINF. Environmental performance is a strongly associated with government effectiveness, although the estimated effect of government effectiveness varies across different estimation methods. Economic growth and urbanization are negatively associated with environmental performance, while renewable energy consumption is positively associated with emissions, suggesting the existence of transitional challenges in the deployment of renewable energy. In addition, the panel threshold analysis indicates that the effect of digitalization on the environmental performance varies across different stages of the industrial development, highlighting structural transformation as a key factor in unlocking the environmental benefits of digitalization. The empirical findings provide important policy implications for promoting environmentally responsible digital transformation across BRICS+ countries.