Digital Planet, a research initiative of The Fletcher School’s Institute for Business in the Global Context, completed a study in July that details the effects of rapid digitalization caused by the COVID-19 pandemic. The study aimed to examine the impact of digitalization on economic evolution and the environment through a metric coined the “Burn-to-Earn” Index.
According to the dean of global business, Bhaskar Chakravorti, Fletcher was motivated by three key questions: How big is the digital economy everywhere? What is the pace of change in the growth of digital technologies? Where are the trade-offs between the benefits and the costs of the greatest?
“The Burn-to-Earn methodology fills a critical gap by delivering a globally harmonized, revenue-based measure of the digital economy that supports comparative analysis and evidence-based decision-making at national, regional, and global levels,” the study reads.
“The index ranks countries on how much they ‘burn’ in terms of CO2 emissions to ‘earn’ digital economic output,” a senior research analyst on the project, Abidemi Adisa, wrote in a statement to the Daily. “By creating a comparable measure across 126 economies it highlights who is achieving digital growth sustainably and who is paying a higher environmental price.”
According to the study, on average, the digital economies of countries grew three times the rate of traditional global gross domestic product. Despite this, there remain several discrepancies in this growth.
According to Chakravorti, European and Scandinavian countries have shown slower growth due to an already high level of digital development, whereas less developed countries have shown rapid growth as infrastructure improves and demand increases. Meanwhile, countries have also shown noteworthy differences in their level of sustainability surrounding new digital technologies and tools.
“The variation reflects differences in energy sources, infrastructure and policy approaches, which means that while the general trend is rising emissions, some nations show that it is possible to grow digital economies more sustainably,” Adisa explained in a statement to the Daily.
Business leaders could use the index to determine where digital growth aligns best with sustainability goals, namely, areas with abundant renewable resources or high demand for technology. Additionally, the use of the index can be leveraged by policymakers.
“Policymakers can use these insights to evaluate the country’s progress, set more ambitious targets, and guide investments in sustainable digital infrastructure,” Adisa wrote.
The authors of the study made several recommendations for how digitalization can occur in a sustainable way.
“Technology companies have a responsibility to invest directly in clean energy production or to locate their data centers in regions where renewable resources are abundant,” Adisa wrote.
Taking these actions would minimize the high energy consumption needed to cool excessively hot data centers, making digital tools more sustainable for the environment.
“The reason why AI is such an electricity hog is because you use up an enormous amount of energy in the data storage, data analysis and computations required for every AI operation,” Chakravorti said. “There are ways in which we can be clever about how to run the same AI operation by using fewer resources and putting a lower amount of stress on the energy grid.”
Chakravorti listed several measures to reduce environmental impacts, which included being judicious in using artificial intelligence and other technologies while also relying on renewable energy sources more heavily.
“Data centers have to be maintained at a certain temperature because they get extremely hot. So in order to keep them cool, we should try to locate data centers in colder climates so it doesn’t take as much energy to cool them,” Chakravorti said.
Economics Professor Ujjayant Chakravorty believes that the recent expansion of AI and other new digital mechanisms will make the resource industry more efficient, among other distinct economic effects.
“If farmers use AI to better target their water towards the crop that needs irrigation, then you are going to use less water and still get the same yields,” he said.
Using AI in such a way may offset some other environmental effects while simultaneously providing an economic boom to farmers. However, other industries may be affected differently, with an added risk of job loss.
“The owners of the means of production, or the owners of capital, may benefit more than poor people who tend to supply labor because labor is going to be a little more under threat with AI,” Chakravorty said.
Chakravorti believes that while there is promise in new technologies such as AI in narrowing certain gaps, they also pose risks of widening social inequalities.
“AI systems can be a great leveler, and at the same time, AI is probably going to be one of the biggest sources of social inequality,” Chakravorti said. “It both contributes to leveling and narrowing gaps and creating social inequalities.”
