Abstract
In response to global commitments to address climate change, economic policies must align with the goal of reducing carbon dioxide (CO₂) emissions and achieving the targets set by the Intergovernmental Panel on Climate Change (IPCC). Information and Communication Technology (ICT) is increasingly recognized as a strategic tool influencing both economic productivity and environmental sustainability. Assessing the appropriate level of economic support for ICT in alignment with IPCC goals is, therefore, a critical step toward managing this technology for sustainable development. This study aims to estimate the ICT subsidy levels required to achieve IPCC environmental targets using the Regional Integrated Climate–Economy (RICE) model. It also investigates the impact of ICT on economic growth and CO₂ emissions. The model is calibrated for Iran and Middle Eastern countries using structural parameters developed by Nordhaus in 2013, and simulations are conducted under four scenarios: (1) a baseline scenario, (2) baseline with ICT, (3) a 2°C temperature constraint scenario (aligned with IPCC goals), and (4) a 2°C scenario with ICT integration. Results show that ICT subsidies are lowest in the baseline scenario and increase significantly under the 2°C constraint scenario. ICT implementation leads to higher economic growth, lower CO₂ concentrations, reduced global temperature, and decreased carbon pricing compared to non-ICT scenarios. These findings highlight the need for targeted ICT support through subsidies for low-carbon digital projects, improved infrastructure in underserved regions, and tax incentives for technology-based businesses—advancing CO₂ reduction, IPCC compliance, and economic development simultaneously
Aim and Introduction:
In response to global commitments to combat climate change, economic policies must be structured to reduce carbon dioxide (CO₂) emissions and achieve the objectives set by the IPCC. One of the key instruments in this context is ICT, which significantly affects both economic productivity and environmental sustainability. ICT enhances efficiency across various economic sectors while simultaneously contributing to emission reduction strategies. Therefore, evaluating economic support for ICT in alignment with IPCC objectives is crucial for managing this technology effectively toward sustainable development.
This study aims to quantify the ICT subsidies necessary to meet the environmental targets of the IPCC using the RICE model. It also examines the impact of ICT on economic growth and CO₂ emissions.
Methodology:
To achieve the research objectives, this study utilizes the theoretical framework of the RICE model, specifically applied to Iran and Middle Eastern countries. The structural parameters of the model are adopted from Nordhaus (2013), and simulations are conducted under four different scenarios:
1) Baseline scenario – reflecting business-as-usual economic growth without ICT integration.
2) Baseline with ICT – incorporating ICT development into the economic system.
3) 2 °C temperature constraint – aligning with the IPCC’s climate target but excluding ICT considerations.
4) 2 °C constraint with ICT – integrating ICT in a constrained climate regime.
These scenarios are used to estimate the ICT subsidy levels required to achieve environmental goals while considering their effects on economic growth and CO₂ emissions. The model incorporates dynamic interactions among economic activities, technological advancements, and climate policies, providing a comprehensive analysis of how ICT subsidies can influence regional economic and environmental outcomes.
Findings:
The results present a compelling case for policy-driven ICT expansion. In both Iran and Middle Eastern countries, the baseline scenarios yield the lowest ICT subsidy requirements. However, when climate constraints are introduced—particularly the IPCC’s 2°C target—the need for subsidies increases substantially. This suggests that more stringent environmental goals necessitate stronger financial support for clean technology transitions.
Importantly, ICT implementation not only reduces CO₂ concentrations but also generates significant positive effects on regional economic growth. By enhancing productivity and enabling low-carbon innovation, ICT lowers the average global temperature trajectory while improving macroeconomic performance. Moreover, scenarios incorporating ICT exhibit notably lower carbon prices, indicating that ICT adoption serves as a cost-effective mitigation mechanism.
In the Middle East, where digital infrastructure is expanding rapidly but unevenly, the required subsidies are higher than in Iran, reflecting differences in baseline ICT penetration, governance capacity, and institutional readiness. Nevertheless, both regions demonstrate improved economic outcomes and environmental indicators when ICT is integrated under constrained scenarios.
Discussion and Conclusion:
The integration of ICT into environmental–economic models such as RICE underscores its strategic value in advancing sustainable development. By facilitating real-time emissions monitoring, optimizing energy consumption, and digitizing traditionally resource-intensive sectors, ICT can act as a catalyst for green growth. The study’s findings underscore the necessity of tailored ICT subsidy programs that reflect each region’s unique developmental challenges and opportunities.
Crucially, the simulations indicate that ICT does not merely function as a supportive tool—it actively transforms the policy landscape. Its capacity to lower the marginal cost of carbon abatement and reduce dependency on fossil-fuel-driven growth models makes it indispensable for climate-smart policy design. In scenarios where ICT is present, the economic system demonstrates greater resilience to climate shocks and stricter emissions regulations, supporting the notion that digital transformation can be harmonized with ecological sustainability.
Furthermore, the study identifies a strong inverse relationship between ICT proliferation and CO₂ intensity, particularly when subsidies are optimized. This finding supports the Environmental Kuznets Curve (EKC) hypothesis, which posits an inverted U-shaped relationship between environmental degradation and economic growth. Environmental degradation initially increases with growth but declines after reaching a certain level of technological maturity and institutional efficiency. ICT accelerates this turning point by fostering cleaner production methods and smarter consumption patterns.
From a policy perspective, this research advocates for smart, region-specific subsidy strategies that maximize the environmental return on investment. Subsidies should prioritize digital infrastructure in underserved areas, incentivize private-sector innovation, and be complemented by measures such as carbon pricing and regulatory reform.
In conclusion, the study confirms that ICT is a critical enabler in the global response to climate change. When supported by appropriate economic incentives, it not only reduces greenhouse gas emissions but also drives inclusive economic growth. For countries such as Iran and those in the Middle East, where climate risks are high and digital transitions are ongoing, investing in ICT subsidies is not merely a policy option—it is a strategic imperative.