The Impact of Digitalization on Economic Performance and Environmental Sustainability in the European Union: Evidence from Panel Data

Abstract

This study investigates the relationship between digitalization, economic performance, and environmental sustainability in the European Union, with the aim of assessing whether the adoption of advanced digital technologies supports sustainable economic development. Responding to an empirical gap in the literature, the paper adopts an integrated economy–environment perspective by examining how the same set of digitalization indicators is associated with both economic outcomes and environmental pressures across EU Member States. The research uses a quantitative approach based on panel data for EU Member States over the period 2015– 2023. The dataset is constructed exclusively from open statistical sources, primarily Eurostat, and includes indicators of digitalization, such as the Digital Intensity Index, artificial intelligence usage, cloud computing, and ICT specialists, together with economic performance measured through GDP per capita and environmental sustainability measured through CO₂ emissions and energy intensity. Control variables include education, R&D expenditure, and employment. The empirical strategy applies pooled OLS regression models estimated in the R statistical environment. Rather than treating the economy and environment as unrelated areas, the analysis evaluates them within a common explanatory framework, while estimating separate models for the economic and environmental dimensions in order to capture their specific relationships with digitalization. The results show that higher levels of digitalization are positively associated with economic performance, while their relationship with environmental sustainability is more heterogeneous and context dependent. Digital adoption appears to generate efficiency gains, but these gains do not automatically translate into lower environmental pressures. The study contributes to the literature by providing comparative EU-level evidence on the dual economic and environmental implications of digital transformation. The findings support the need for coordinated public policies that connect digital transformation strategies with sustainability objectives, particularly through investments in digital skills, innovation capacity, and green technologies.