AI-ready governments deliver cleaner, more sustainable economic growth

Higher national income levels, measured through GDP, and larger government final consumption expenditures both correlate positively with green growth. These relationships confirm that wealthier states, and those with more active public spending programs, are better positioned to finance environmental initiatives and support innovation in green technologies.

Europe’s transition toward a cleaner, more sustainable economic model is increasingly shaped by the digital capacities of its governments, according to a major new study published in Sustainability that links artificial intelligence readiness in the public sector to measurable improvements in environmental performance.

The research, titled “The Moderating Role of Governmental Artificial Intelligence in Shaping Green Growth Dynamics in the European Union,” examines EU member countries from 2019 to 2023, a period marked by accelerated digitalization and the rollout of the European Green Deal. During these years, governments expanded their use of artificial intelligence across sectors, from public administration and infrastructure planning to environmental monitoring and regulatory compliance. The authors argue that AI readiness, defined as the institutional, technological and governance capacity to deploy AI effectively, is now directly influencing green growth outcomes across the region.

The analysis is based on the Government AI Readiness Index and the Global Green Growth Index to form a detailed, multi-year panel dataset. Using a mix of econometric models, the researchers test how governmental AI capabilities interact with macroeconomic conditions, social development, and political stability to shape national green growth trajectories. Their results consistently show that countries with higher AI readiness outperform others in advancing environmentally responsible growth, even after accounting for income levels, government spending, foreign investment, human development and urbanization trends.

AI readiness becomes a predictor of green growth

Government AI readiness has a persistent positive effect on green growth across all models tested. In both static and dynamic analyses, the index emerges as a strong explanatory variable that remains significant even after controlling for economic development and social indicators. The research underscores that AI capabilities within public institutions are no longer an optional modernization tool. Instead, they are becoming structural determinants of policy effectiveness, resource efficiency and environmental outcomes.

The study’s dynamic panel results further show that green growth is path-dependent: nations already performing well in climate-aligned development tend to maintain their momentum when supported by AI-driven governance systems. This finding reinforces the idea that digital transformation has long-term environmental consequences, strengthening institutional routines that encourage cleaner economic activity.

Government AI systems contribute to green progress in several ways. They help optimize resource distribution, strengthen monitoring of emissions and pollution, improve transparency in public spending, and enable real-time tracking of energy use and environmental risks. Advanced analytics also support more targeted climate policies and more efficient public services, reducing waste and supporting the shift toward circular economic models.

The authors frame these effects within established theoretical frameworks, including the Technology–Organization–Environment model and Dynamic Capabilities Theory. These perspectives explain that governments with stronger digital infrastructures and stronger institutional adaptability are better equipped to push climate policies, support green innovation and respond quickly to emerging environmental challenges.

Macroeconomic and social factors shape environmental outcomes

The study provides a nuanced picture of how economic and social conditions influence Europe’s green growth trajectory. Higher national income levels, measured through GDP, and larger government final consumption expenditures both correlate positively with green growth. These relationships confirm that wealthier states, and those with more active public spending programs, are better positioned to finance environmental initiatives and support innovation in green technologies.

Foreign direct investment, however, shows a consistent negative association with green growth. This suggests that some forms of investment entering EU markets still originate from polluting sectors or bring carbon-intensive production processes. The findings present an important challenge for European policymakers: aligning inward investment with sustainable development goals requires stricter environmental oversight and stronger incentives for low-carbon industry.

The Human Development Index, typically associated with social well-being, shows a more complicated relationship. Higher HDI values correlate with lower green growth performance in several models. This implies that higher living standards often coincide with consumption patterns that place greater strain on the environment. Urbanization follows a similar trend, suggesting that expanding cities produce both economic benefits and environmental pressures that require more advanced planning tools to mitigate.

Political stability, by contrast, reliably supports stronger environmental outcomes. Stable governments are better able to design coherent sustainability strategies, enforce regulations, and secure public support for long-term climate policies. The study highlights political stability as a fundamental backdrop that enhances the impact of digital transformation and AI adoption on environmental performance.

EU policy frameworks amplify the impact of AI-driven governance

The study places its findings within Europe’s broader policy landscape, including the European Green Deal, the Digital Europe Programme and the recently approved Artificial Intelligence Act. Together, these frameworks demonstrate the European Union’s dual commitment to digital transformation and climate neutrality. The authors argue that aligning these agendas is essential: digital governance tools can amplify the impact of environmental regulations, while sustainability objectives can guide the ethical and strategic development of public-sector AI.

Governmental AI adoption supports several pillars of the EU’s climate agenda. It accelerates the rollout of renewable energy systems, enhances low-carbon transport networks, strengthens environmental surveillance, and improves the accuracy of climate risk modeling. In the public sector, AI improves efficiency in service delivery, reduces administrative burdens and supports more strategic allocation of green investments. These effects collectively improve governance capacity, an essential ingredient for sustained green development.

The study’s authors stress that the benefits of governmental AI do not arise automatically. The success of AI systems depends on institutional quality, data governance, accountability, and ethical safeguards. Public trust also plays a critical role, as citizens must feel confident that AI-driven decisions are fair, transparent and aligned with public interests. Without strong governance frameworks, AI adoption may reinforce existing inequalities or introduce new risks, potentially weakening progress on green growth rather than accelerating it.

The research also highlights a structural challenge in the region: disparities in AI readiness across EU member states. While northern and western European countries generally rank high on digital governance indicators, newer EU members in central and eastern Europe show more uneven progress. These gaps threaten to widen regional inequalities unless targeted digital capacity-building programs are adopted to support lagging states. The authors identify this as an urgent policy priority.