Do Information and Communication Technology, Foreign Direct Investment and Renewable Energy Impact Carbon Footprint? Evidence From South Asian Countries

Abstract

Amid intensifying global climate challenges and the rapid expansion of digital technologies, this study analyses the effects of renewable energy (RE) and information and communication technology (ICT) on carbon footprint (CF) while examining the moderating role of foreign direct investment (FDI) within the proposed framework. The study utilizes a panel dataset covering five South Asian Economies over the period from 1996 to 2022. To capture the multidimensional nature of digitalization, a composite ICT index is constructed. Furthermore, the method of moments quantile regression (MMQR) is employed to examine heterogeneous effects across different levels of carbon emissions. The results reveal that ICT decreases CF at the lower quantile. Importantly, the interaction between ICT and FDI has a significant positive impact on the environmental benefits of ICT, particularly at the lower quantile. Furthermore, RE tends to increase CF at the lower quantile. However, the negative effect of RE on emissions is strong at the higher quantile. Notably, this effect becomes more pronounced in the presence of FDI. This implies that FDI reinforces the emission‐reducing capacity of RE where it is most needed. These findings indicate that when digital and clean energy changes are accompanied by specific foreign investments, they are more likely to result in environmental benefits. Therefore, policymakers in South Asia should adopt a strategic policy that balances the expansion of technology with the inflow of capital with an aim to improve environmental sustainability.