Digitalization and Environmental Quality in the OECD : A Structural‐Break Analysis of the Ecological Footprint and Load Capacity Factor

Abstract

ABSTRACT This study examines how digitalization shapes environmental quality in OECD countries using the ecological footprint (demand side) and the load capacity factor (supply side) within a balanced panel dataset of 30 countries covering the 2002–2021 period. Income, urbanization, natural resource rents, and renewable energy variables are each included, along with four indicators of digitalization (fixed broadband, fixed‐line telephony, mobile cellular connections, and internet penetration). Second‐generation tests employed in this process confirm the cointegration findings by accounting for cross‐sectional dependence, slope heterogeneity, and structural breaks. Common Correlated Effects Mean Group (CCE‐MG) estimates indicate that digitalization does not have a consistent impact on environmental quality. The findings reveal that while income growth expands the ecological footprint (≈0.93–1.00) and reduces biocapacity (−0.77 to −1.02), renewable energy usage reverses both effects. Analyses allowing for coefficient variation across regimes demonstrate that broadband and the internet reduce the ecological footprint (−0.084 and −0.100) and increase biocapacity (0.117 and 0.148), but only after a structural break occurring around the 2007–2009 financial crisis.