The nexus between digital and green transitions
The major trends introduced in chapter 1, associated with technological change and the global adoption of policies for environmental sustainability, have multiple areas of interaction. Understanding the challenges, areas of conflict and synergies that these trends pose is key to the region’s development.
A first area of conflict between digitalization and environmental sustainability is associated with material requirements. Despite the immaterial nature of the value produced by the growing digital economy, it depends on a physical component that supports it. On the one hand, the devices that materialize the link between people and the digital world: cell phones, personal computers and an increasing number of devices of all kinds that connect to the network. On the other hand, the supporting infrastructure for data transport, storage and transformation, comprising physical cable or fiber optic connections and data storage and computing servers. In addition, policies for sustainability also have a significant material requirement, as they rely on the development of solar panels, windmills, electrical grids and batteries. Furthermore, some evidence indicates that the material intensity of electronic devices, which includes all the physical resources mobilized in their production, is higher than average, while their obsolescence is accelerated (UNCTAD, 2024).
The digital and green transitions change the composition of the economy’s material demand and depend on a broader set of elements, such as lithium and cobalt for batteries, copper and aluminum for power grids, gold and rare earths for electronic devices and semiconductors. This new composition gives greater relevance to a number of countries in the region. Notably Chile, Bolivia and Argentina share the lithium triangle, where an estimated 46 % of global reserves are concentrated; Chile, Peru and Mexico, 36 % of copper; Brazil, 26 % of graphite and 19 % of rare earths, etc. (UNCTAD, 2024). The mining required for the extraction of these materials is associated with significant environmental impacts. The extraction, processing, use and final disposal of seven metals with growing demand by these trends may increase their environmental impact by two to four times by 2060 (OCDE, 2019).
A second area of tension concerns the energy demand associated with digitalization. The production and use of electronic devices, networks and data centers demand a significant amount of energy that, to date, has significant GHG emissions associated with it. In terms of use, for example, in 2022, the combined electricity consumption of a selected set of the largest digital companies reached about 125 terawatt-hours (TWh), a level similar to the annual electricity consumption of Argentina (139 TWh in 2022) (Ministerio de Economía de Argentina, 2022). In addition, this technological progress drives an accelerated growth in energy consumption in line with new uses, as is the case of general-purpose artificial intelligence. In this regard, Microsoft’s electricity consumption increased by 70 % between 2021 and 2023 to reach 24 TWh, the period of public deployment of ChatGPT applications supported by this company’s infrastructure (Microsoft, 2024). While the energy demand of this sector is in the form of electricity and is comparatively feasible to decarbonize, the rate of growth presents challenges for emissions mitigation.
But new technologies and digitalization also present opportunities for environmental sustainability, since the developments have use cases of central importance. A first technological application that stands out is the enhancement of monitoring capabilities. First, the increasing availability of satellite data makes it easier to monitor key environmental parameters remotely and with increasing temporal and spatial granularity. This is a precondition for controlling events such as deforestation, forest fires, accidental or deliberate methane releases in the fossil fuel value chain, mining and illegal fishing, among others. This application is further enabled by the development of advanced data analysis tools (deep learning models for automated detection in images) and the growing capacity to process data.
A good example of this application is the «Action Plan for the Prevention and Control of Deforestation in the Amazon», created in 2004 in Brazil. This plan is associated with a reduction in deforestation of almost 80 % in eight years from the peak recorded in 2004. The central component of this plan was the creation of a real-time deforestation detection system (DETER) based on satellite data (Ferreira, 2023).
In a second application, digitalization can enable substantial emissions reductions in the energy transition by enabling electricity demand response mechanisms. These include the interconnection of electronic devices and the establishment of smart grids that enable automatic optimization of consumption. The central component of clean energy systems are non-conventional renewable energies, mainly solar and wind. These are characterized by their intermittency: they deliver electricity at virtually zero marginal cost, but only when the sun shines or the wind blows. The technologies mentioned above make it possible to automate demand response to take advantage of surplus electricity and reduce consumption in times of shortage, which avoids resorting to fuel-based generation. Bidirectional electricity meters, one of the components of smart grids, are an example of an application. These allow electricity consumption to be collected and reported to operators in near real time and reward household consumption reductions in times of shortage. Additionally, they allow households equipped with solar panels or batteries (domestic or car batteries) to inject electricity into the grid when it is most needed (IDEAL, 2022; IEA, 2023d).
In a third application, digitalization can enable efficiency gains with implications for environmental impact. In this regard, Hubbard (2003) finds that the adoption of on-board computers in the road freight transportation sector resulted in an increase in the rate of cargo capacity utilization of three percentage points, representing substantial economic benefits. Precision agriculture, discussed in the previous section, is another example of efficiency improvements and environmental outcomes associated with digitalization.