Artificial intelligence and climate risk: A double machine learning approach

Hua Yin, Xieyu Yin and Fenghua Wen

International Review of Financial Analysis, 2025, vol. 103, issue C

Abstract: We study the use and environmental impact of AI technologies. We propose a measure of the country-level AI development index. Utilizing the double machine learning method, we discover a net mitigating impact of AI on climate risk. Mechanism analysis indicates that this influence primarily stems from advancements in resource utilization efficiency, the promotion of green innovation, the reinforcement of environmental policy effectiveness, and the augmentation of green finance. Heterogeneity analysis reveals that the mitigating effect of AI on climate risks is predominantly observed in developed countries and those with better institutional environments. Our results imply that while AI overall reduces climate risks, it can also contribute to the exacerbation of climate-related inequalities.

Keywords: Artificial intelligence; Climate risk; Climate inequalities; Double machine learning (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:103:y:2025:i:c:s105752192500256x

DOI: 10.1016/j.irfa.2025.104169

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