Abstract
This study estimates the short- and long-run effects of Internet usage and economic growth on carbon dioxide (CO2) emissions using annual time series macro data for Australia for the period 1985-2012. Autoregressive distributive lag (ARDL) bounds and Gregory-Hansen structural break cointegration tests are applied. ARDL estimates indicate no significant long-run relationship between Internet usage and CO2 emissions, which implies that the rapid growth in Internet usage is still not an environmental threat for Australia. The study further indicates that higher level of economic growth is associated with lower level of CO2 emissions; however, Internet usage and economic growth have no significant short-run relationship with CO2 emissions. Financial development has both short-run and long-run significant positive association with CO2 emissions. The findings offer support in favor of energy efficiency gains and a reduction in energy intensity in Australia. However, impulse response and variance decomposition analysis suggest that Internet usage, economic growth and financial development will continue to impact CO2 emissions in the future, and as such, this study recommends that in addition to the existing measures to combat CO2 emissions, Australia needs to exploit the potential of the Internet not only to reduce its own carbon footprint but also to utilize information and communication technology (ICT)-enabled emissions abatement potential to reduce emissions in various other sectors across the economy, such as, power, renewable energy especially in solar and wind energy, agriculture, transport and service.