Improving urban energy efficiency: What role does the digital economy play?

The digital economy (DEY) has emerged as a critical tool for promoting sustainable urban development through digital transformation. This study examines the effect of DEY on urban energy efficiency in China, employing data from 279 cities between 2011 and 2019. The estimation results of this study reveal a U-shaped relationship between DEY and urban energy efficiency. Specifically, in its initial development stage, DEY reduces energy efficiency, but as it matures, DEY ultimately leads to an improvement in energy efficiency. Moreover, the dynamic threshold model indicates that the U-shaped effects of DEY on energy efficiency depend on industrial structure upgrading, greening urban areas, and the financial support of governments. The results of the Spatial Durbin model confirm that DEY has a spatial spillover effect on urban energy efficiency, but only when the economic distance between cities is taken into account. Finally, the results of the panel vector autoregression model illustrate a long-term bidirectional causality between DEY and urban energy efficiency. According to these findings, this study suggests several specific recommendations for DEY and sustainable urban development.