Enhancing Green Economy with Artificial Intelligence: Role of Energy Use and FDI in the United States

The escalating challenge of climate change necessitates an urgent exploration of factors influencing carbon emissions. This study contributes to the discourse by examining the interplay of technological, economic, and demographic factors on environmental sustainability. This study investigates the impact of artificial intelligence (AI) innovation, economic growth, foreign direct investment (FDI), energy consumption, and urbanization on CO2 emissions in the United States from 1990 to 2022. Employing the ARDL framework integrated with the STIRPAT model, the findings reveal a dual narrative: while AI innovation mitigates environmental stress, economic growth, energy use, FDI, and urbanization exacerbate environmental degradation. Unit root tests (ADF, PP, and DF-GLS) confirm mixed integration levels among variables, and the ARDL bounds test establishes long-term co-integration. The analysis highlights that AI innovation positively correlates with CO2 reduction when environmental safeguards are in place, whereas GDP growth, energy consumption, FDI, and urbanization intensify CO2 emissions. Robustness checks using FMOLS, DOLS, and CCR validate the ARDL findings. Additionally, Pairwise Granger causality tests reveal significant one-way causal links between CO2 emissions and economic growth, AI innovation, energy use, FDI, and urbanization. These relationships emphasize the critical role of AI-driven technological advancements, sustainable investments, and green energy in fostering ecological sustainability. The study suggests policy measures such as encouraging green FDI, advancing AI technologies, adopting sustainable energy practices, and implementing eco-friendly urban development to promote sustainable growth in the USA.