Navigating the Twin Transition Paradox: How Enterprise Digitalization Induces the Carbon Rebound Effect and the Mitigating Role of Energy Governance

Abstract

This study examines how enterprise digitalization affects carbon emissions through three channels: technical energy-efficiency gains, independent output growth, and efficiency-induced production expansion. Using panel data from 600 Chinese manufacturing firms across three industries over the period 2016 to 2025, the analysis employs two-way fixed effects regressions with enterprise-clustered standard errors and enterprise-block bootstrap inference. Technical energy-efficiency gains are derived from energy audit records, while digitalization and energy governance are measured through structured enterprise questionnaires. The results show that higher levels of digitalization are associated with larger technical energy-efficiency gains. These gains are in turn positively associated with output expansion after the separate contribution of digitalization to output has been accounted for. Energy governance weakens this transmission, with the marginal output response to efficiency gains declining from 1.28 at a governance level of 0.25 to 0.63 at 0.75. The counterfactual decomposition yields an aggregate carbon rebound estimate of 92.91 percent, though the 95 percent bootstrap interval ranges from 75.04 to 110.54 percent, crossing the complete-rebound threshold. Realized carbon savings thus remain uncertain in magnitude. These findings contribute to research on digital management and carbon governance by distinguishing efficiency-induced rebound from independent scale effects and by showing that internal energy governance can moderate the expansion channel through which efficiency gains translate into additional emissions.