Unveiling the Role of Artificial Intelligence and Stock Market Growth in Achieving Carbon Neutrality in the United States: An ARDL Model Analysis

Abstract

Given the fact that climate change has become one of the most pressing problems in many countries in recent years, specialized researches on how to mitigate climate change has been adopted by many countries. Within this discussion, the influence of advanced technologies in achieving carbon neutrality has been discussed. While several studies investigated how AI and Digital innovations could be used to reduce the environmental footprint, the actual influence of AI in reducing CO2 emissions (a proxy measuring carbon footprint) has yet to be investigated. This paper studies the role of advanced technologies in general, and Artificial Intelligence (AI) and ICT use in particular, in advancing carbon neutrality in the United States, between 2021. Secondly, this paper examines how Stock Market Growth, ICT use, Gross Domestic Product (GDP) and Population affect CO2 emissions using the STIRPAT model. After examining stationarity among the variables using variety of unit root tests, this study concluded that there are no unit root problem across all the variables, with a mixed order of integration. The ARDL bounds test for cointegration revealed that variables in this study have a long-run relationship. Moreover, the estimates revealed from ARDL model in the short- and long-run indicated that economic growth, stock market capitalization and population significantly contributed to the carbon emissions in both the short-run and long-run. Conversely, AI and ICT use significantly reduced carbon emissions over both periods. Furthermore, findings were confirmed to be robust using FMOLS, DOLS, and CCR estimations. Furthermore, diagnostic tests indicated the absence of serial correlation, heteroscedasticity and specification errors and, thus, the model was robust.