What is Digital economy?
The term ‘Digital Economy’ was first used by Don Tapscott in his book, The Digital
Economy: Promise and Peril in the Age of Networked Intelligence. So, what exactly is digital
economy? According to Deloitte, “it’s the economic activity that results from billions of
everyday online connections among people, businesses, devices, data and processes”.
Deloitte also mentions that “the backbone of the digital economy is hyper connectivity which
means growing interconnectedness of people, organisations and machines that results from
the Internet, mobile technology and the internet of things (IoT)”.
Are there any correlation between increasing economic activities and subsequent
deterioration in ecological sustainability?
Analysing from a historical angle, we can observe that the technological innovations,
especially the major ones have caused fundamental changes both to the economy and
environment around us, for better or for worse (Sui and Rejeski 2002).
According to the scientists who study climate change closely, “the global average
atmospheric carbon dioxide (CO2) in 2018 was 407.4 parts per million (ppm for short), with
a range of uncertainty of plus or minus 0.1 ppm” (Lindsey 2020). Thus, in the present day,
C02 levels are higher than at any point of time, at least in the past 800,000 years (Lindsay
2020). In addition to these findings are the observations made by scholars like Lewis
Mumford, David S. Landes and Daniel R. Headrick – today’s ecological footprints are in
most cases, a result of anthropogenic economic activities, as mediated by disruptive
In this era of digital economy and the “extreme productivity wrought by the digitalization of
communication, energy, and transportation” (the natural by-products of digital economy), the
pertinent question though is, what could be the plausible impacts of digital economy on the
ecological sustainability, if any (Rifkin 2015).
The school of thought comprising of non-conventional economists advocate that digital
economy and for that matter any economic activity has significant impact on our
environment. This school of thought base their arguments upon ‘the laws of
thermodynamics’. Let us now analyse the laws of thermodynamics by Rudolf Clausius and
William Thomson (Kelvin).
According to the first law of thermodynamics, energy can neither be created nor destroyed.
The law states that the amount of energy in the universe has remained the same since the
beginning of time, will be until the end of time, and while the energy remains fixed, it is
continually changing form, but only in one direction, from available to unavailable. The
second law of thermodynamics states that, energy always flows from hot to cold,
concentrated to dispersed, ordered to disordered. For example, if a chunk of coal is burned,
the sum total of the energy remains constant, but is dispersed into the atmosphere in the form
of carbon dioxide, sulphur dioxide, and other gases. Physicists calls this dispersed energy,
which no longer can perform any useful work as ‘entropy’.
Keeping these laws in mind, let us revisit the arguments made by the non-conventional
economists that all economic activities including digital has significant impacts on the
ecological sustainability. It is a known fact that all activities, economic or otherwise will
require tapping of energy in the nature, for converting them into various finished goods and
services. As rightly pointed out by Rifkin, “whatever energy is embedded in the product or
service is at the expense of energy used and lost—the entropic bill—in moving the economic
activity along the value chain and eventually, the goods we produce are consumed, discarded,
and recycled back into nature, again, with an increase in entropy”.
Thus, in the process of increased economic activities including the ones pertaining to digital
economy, results in a loss of energy from the nature. This leads to an energy imbalance in the
nature, resulting in a significant rise in carbon dioxide and other contributors of global
warming. The present day accumulation of CO2 and the associated global warming
challenges, primarily due to the aggressive economic activities during the First and Second
Industrial Revolution, can be cited as the most relevant example (Rifkin 2015). The annual
global emissions have doubled since 1970’s, in spite of efforts to decrease the ‘energy related
greenhouse gas emissions’, signalling that the economic activities during the Third and the
Fourth Industrial Revolution have also been contributors to the present day global warming
challenges (Heinonen et.al. 2015). In fact, as per a 2009 report by International Energy
Agency(IEA), total energy consumption by the world and CO2 emission is increasing day by
Potential impacts of Digital Economy on environment
According to Berkhout and Hertin, the primary environmental policy concern due to
digital economy stems from the use and disposal of Information and Communication
Technologies (ICTs), which forms the backbone of any growing digital economy. The
different products of ICTs like the personal computers and its associated hardware
parts (screens, scanners etc.), mobile phones, electrical cables and wires etc., depend
on varied products with “heterogenous environmental characteristics” and “uses
considerable amounts of electricity, and incorporates significant quantities of
materials that are harmful to the environment” (Berkhout and Hertin 2004).
Especially, the disposal of different products of ICTs at the end of their shelf life
leads to incineration and landfill piled up with toxic waste causing potential
environmental damages (to natural resources like soil, water, air) as well as
considerable “health hazards for workers in recycling and for the general public”
(Teppayayon et.al. 2009).
Another major impact comes from the consumption side of ICTs. “ICTs take a
growing proportion of the global energy budget and greenhouse gas emissions in
themselves, be they for consumer goods, web searches or ICT use in business”
(OECD 2009). International Atomic Agency also reports that CO2 emissions
especially from data centres are increasing because of larger ‘Internet web server’
farms. The energy consumption by the data centres of corporate sectors consume
massive energy which is further amplified by the exuberant cooling demands from
these centres (Teppayayon et.al. 2009). Thus, there is a significant proportion of
energy consumption by the digital economy which ultimately leads to energy loss
“Digital Disruptions for Sustainability (D^2S)”: Report by Future Earth
The D^2S report (2020) explores the interconnected links between climate change and digital
activities in our contemporary society. It “highlights research, innovation, and actions needed
to drive societal transformations in support of a more sustainable and equitable world”. D^2S
is the outcome of a year-long research by the team Future Earth. Future Earth collaborated
with around 250 digital and sustainability experts from all around the world to prepare D^2S
report. The report addresses climate change as a challenge to our society and points towards
the urgent need for a ‘deep decarbonization’ in our day-to-day activities. Report also focus on
the various “the opportunities and challenges of leveraging new capabilities of the digital age
to break these constraints and drive rapid and unprecedented societal transformations needed
to achieve the Paris Agreement climate goals”. D^2S also points out that in the contemporary
world, digital economy is indeed a threat to human rights, democracy, social justice and
ecological sustainability. D^2S reminds the world what the initial objective of the digital
revolution was i.e. to shift our society towards a more ‘equitable and greener economy’ and
the urgent need to revise our vision and activities towards achieving this objective at the
For the sustainable maintenance and protection of environment, it is time we change our
traditional approach towards conventional economic activities. We need to increasingly
channelize our attention towards promoting a ‘green economy/sustainable economy’ and
smart green technologies which would lead to better energy conservation and ecological
sustainability. The green economy and it benefits to our environment is aptly summarized by
United Nations Environment Programme (UNEP), as “the process of reconfiguring
businesses and infrastructure to deliver better returns on natural, human and economic capital
investments, while at the same time reducing greenhouse gas emissions, extracting and using
less natural resources, creating less waste and reducing social disparities” (UNEP 2010).
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