Does artificial intelligence reduce carbon emissions in OECD and BRICS? Examining the role of research and development.

Climate change, caused by excessive energy use and carbon dioxide emissions, poses a significant threat to human populations, leading to displacement and hindering economic growth. Transitioning to net-zero emissions requires investments in low-carbon technologies and renewable energy sources. AI is seen as a versatile technology that can efficiently transform and solve climate change issues. This paper examined the impact of AI on carbon emissions by comparing OECD and BRICS countries. Furthermore, it assessed the moderating role of R&D. A dynamic panel model using the GMM estimation, PCSE and DK are applied to avoid the issues of endogeneity and cross-sectional dependence. Two categories of data, spanning from 2013 to 2023 for the AI investment variable and from 2012 to 2022 for the AI project variable, are used. In addition, we utilised AI patent data spanning from 1980 to 2023 to verify the robustness of the results. The baseline estimation of AI investment and AI impactful projects on carbon emission in the short run, as well as the long run, shows that AI adoption has a positive impact on carbon emissions. The interaction of RD changes the positive effect into a negative one, with coefficient values of -0.056 and -0.170 (-0.0326 and -0.1928 in the long run) for the AI project and AI investment, respectively. Therefore, the effect is channelled through green innovation, clean energy adoption in AI software development, with the support of R&D investment, and also improvement in energy technology. In the baseline model, AI increases emissions in BRICS and OECD. With the interaction of R&D, there is a strong mitigating effect of AI on carbon emissions in OECD. Nevertheless, there is still a significant effect in BRICS countries. The robustness results indicate that AI patents contribute to increased emissions in the power sector and industry, with a greater impact in the power sector. From these findings, suitable policy recommendations have been proposed.