PhD thesis by Artjom Saia: Economic Perspectives of Twin-transition: Low-carbon Production and Inclusive Digitalization

On May 9th, Artjom Saia, a PhD student at TalTech’s Department of Economics and Finance, defended his doctoral thesis, titled “Economic Perspectives of Twin-transition: Low-carbon Production and Inclusive Digitalization”. The thesis examines the nexus between green and digital transformations – the “twin” transitions and their effects, moderated by (green) technology development and implementation, on CO2 emissions. Secondly, the thesis examines progress in digital inclusion that in addition to environmental effect has crucial socio-economic implications. Specifically, higher levels of digital skills and broadband Internet access improve employment outcomes, while the COVID-19 has been found to have reshaped digitalization–employment relationship. The thesis consists of three published articles:

The first publication, titled “Digitalization and CO2 emissions: Dynamics under R&D and technology innovation regimes”, examines the transition in regime induced by research and development (R&D) output level that moderates the relationship between digitalization and CO2 emissions. The study tests the environmental Kuznets curve (EKC) hypothesis using a panel smooth transition regression (PSTR) estimator with two regimes of R&D output (measured in technological patents) to account for impacts of digitalization, human capital, and income level on CO2 emissions. The study includes data for 55 high- and middle-income countries between 1996 and 2019. The results confirm that CO2 emissions have an inverted U-shaped relationship with digitalization and income levels and support the EKC hypothesis. This nonlinear association shifts smoothly between the two regimes with the level of exogenous R&D output having an inflection point of 39.9 technological patents per million inhabitants. The digitalization index in the lower R&D regime leads to an increase in CO2 emissions, while in the higher R&D regime digitalization entails a decrease in CO2 emissions, with digitalization’s effect decreasing CO2 emissions exceeding its increasing effect. Policymakers should take these findings into account, considering the benefits of twin transitions when underpinned by the development of contemporary and green technologies.

The second publication, titled “Techno-economic assessment of CO2 capture possibilities for oil shale power plants”, provides a comparative techno-economic evaluation of the implementation of two alternative CO2 capture technologies by retrofitting existing oil shale power plants in Estonia. Estonia's energy industry has been heavily dependent on oil shale, a fossil fuel whose combustion results in high CO2 emissions. The technical analysis shows that two technologies can substantially reduce CO2 emissions. However, the implementation of CC technologies will lead to a decrease in the generated energy of power units. The financial feasibility of CO2 capture in Estonian oil shale power plants relies on the electricity market’s long-term prospects and the emissions trading system. Operating at full CC capacity over an expected 24-year service life would cost at least €42 per ton of CO2 captured and €89 per ton of CO2 captured and stored at 2021 prices. Actual costs may surpass the payment of CO2 emissions allowance fees and environmental taxes or lead to a decrease in competitiveness. Thus, only if the negative externalities arising from CO2 emissions and domestic energy security concerns cannot be realistically alleviated by alternative, stable and manageable energy sources should the government support the CC technologies’ implementation.

The third publication, titled “Digital Capacity and Employment Outcomes: Microdata Evidence from Pre-and Post-COVID-19 Europe”, investigates the nexus between employment outcomes and access to broadband Internet, educational attainment, and digital skills deploying pre- and post-COVID-19 survey waves for 2017, 2019 and 2021 of the Eurostat Community Statistics on the Information Society in 27 European economies. The joint assessments of individuals’ employment outcomes and digital skills include external controls using statistics from Eurostat and data on COVID-19 infection cases, as well as data on government restrictions and economic support measures. Broadband Internet access, digital skills, and educational attainment combine to raise employment outcomes, but the COVID-19 transformed these relationships in disparate ways. It increased the employment benefits of possessing at least some digital skills, while the relative advantages of more advanced digital skills have declined. The pandemic enhanced the employment outcomes from formal education and approximately tripled the labor market advantages from having household members with tertiary education.

The results of the thesis show that with a higher level of R&D output (technology development), digitalization entails a reduction in CO2 emissions. This also applies to the implementation of currently cost-ineffective CC technologies, which can provide a smooth green transition, with the potential of digitalization (e.g., AI, ML, digital twins) to improve the economic efficiency of CC processes (e.g., R&D, optimization, integration with renewable energy). However, the use of digital technologies requires higher levels of digital skills, which can improve an individual’s employment prospects and highlight the need for intensified efforts (upskilling, learning, improving educational programs) to ensure digital empowerment.

The PhD thesis of Artjom Saia was supervised by:

Professor Kadri Männasoo, PhD (primary supervisor)

Professor Aaro Hazak, PhD (co-supervisor).

Opponents:

Professor Javier Ordóñez, PhD (Institute of International Economics, Department of Economics, University Jaume I, Castellón, Spain)

Helen Poltimäe, PhD (School of Economics and Business Administration, Chair of Economic Modelling, University of Tartu, Estonia).

The doctoral thesis is available here: LINK

This project has received funding from the European Union’s Horizon 2020 Research and Innovation programme under Grant agreement no 952574 and the Marie Skłodowska-Curie Grant Agreement number 734712. The research leading to these results has received funding from the EEA Grants 2014-2021 Baltic Research Program under project S-BMT-21–8 (LT08-2-LMT-K-01–073). This work is based upon work from COST Action HiTEc, CA21163, supported by COST (European Cooperation in Science and Technology). The Estonian Research Council funded this research from the National Programme for Addressing Socio-Economic Challenges through R&D (RITA), which is supported by the Estonian Government and European Regional Development Fund, under the project “Climate Change Mitigation with CCS and CCU Technologies” (ClimMit, grant No. RITA1/02-20). Funding was received from the Doctoral School in Economics and Innovation, supported by the European Union, European Regional Development Fund (Tallinn University of Technology ASTRA project “TTÜ Development Program 2016-2022” [2014-2020.4.01.16-0032]).