Bytes into watts: Input–output tracking of energy-sector digitalization and its decarbonization effect

The digitalization of the energy sector is emerging as a key driver of deep urban decarbonization. Yet rigorously quantifying this digital shift—and therefore its true impact on emissions—remains challenging. To address the gap, we develop a Digital Inputs Technical Coefficient (DITC) drawn from an inter-city, multi-regional input–output table that differentiates enterprise ownership. Merging the DITC with panel data for 340 Chinese cities in 2002, 2007, 2012 and 2017, we investigate how digitalization influences carbon total-factor productivity (CTFP). Our estimates indicate that a one-standard-deviation increase in the DITC raises CTFP by roughly 0.63 pp. This effect operates through three channels: green technological innovation, more efficient factor allocation, and a cleaner energy mix. The emission-reduction multiplier for foreign enterprises (1.89) far exceeds that for domestic firms (0.83), pointing to amplification via technology spill-overs, competitive pressures, and stricter governance standards. Digitalization’s benefits also diverge sharply across regions: energy-poor cities gain far more than already-developed ones. Moreover, digital infrastructure exhibits a pronounced threshold effect—cities below a critical level see virtually no gains, whereas those above it experience strongly amplified benefits. Overall, the study offers new empirical evidence on measurement, mechanisms and heterogeneity in energy-sector digitalization, providing a solid basis for precisely targeted investments and equitable transition policies. While the analysis is centered on 340 Chinese cities (2002–2017), the identified mechanisms and heterogeneity offer transferable insights for other developing economies pursuing similar digital and energy transitions.