A new study published in the journal Sustainability has explored whether AI can support short-run sustainable economic growth, given growing criticism over the energy consumption of data-driven transformation.
The study, Can Artificial Intelligence Drive Sustainable Growth? Empirical Evidence on the AI–Energy–Growth Nexus in Advanced Economies, applied four econometric models, using annual data from across the G7 countries, China, and South Korea over the 2010 to 2025 period, as well as from the 2017 to 2025 period.
‘Motivated by the ongoing debate on whether AI-driven digital transformation can coexist with environmental sustainability, the analysis integrates technological and energy–economics frameworks,’ the researchers note.
Economic growth
The results indicate that investment in artificial intelligence on its own does not significantly enhance short-run economic growth, given the adjustment costs and learning effects in the early phase of AI adoption.
‘However, this does not imply that AI is ineffective per se,’ the researchers add, noting that when AI investment is incorporated with renewable energy capacity, a positive effect on short-run economic growth is evident, indicating that AI can contribute to growth when supported by sufficient renewable energy infrastructure.
‘The findings show that when AI investment is combined with higher renewable energy capacity, its growth impact becomes positive and statistically significant, underscoring the importance of complementary green energy infrastructure in unlocking the short-run benefits of AI-driven transformation,’ they state.
AI and energy demand
The study also identifies two channels through which AI affects energy demand, dubbed the ‘expansion effect’ and the ‘efficiency effect’ – in the former’s case, this reflects increased electricity consumption through data centres, cloud computing and associated technologies, while in the case of the latter, it reflects AI’s ability to optimise production processes and resource use.
As it notes, renewable energy capacity has the ability to moderate these effects, enabling digital expansion to better align with environmental objectives.
‘In the short run, AI-related expansion may increase energy demand unless it is supported by renewable energy capacity, appropriate energy pricing, and innovation-oriented financial systems,’ the researchers note. ‘This implies that policymakers should coordinate AI strategies with energy transition policies and avoid expecting instant growth or efficiency benefits from digital investments.’ Read more here.
