<p>The emergence of the digital economy has become a crucial driver in the global economic and industrial transformation, particularly aiding China in achieving its goals of peak carbon emissions and carbon neutrality. This study examines balanced panel data from 282 Chinese cities spanning 2006 to 2019. We use the “National Big Data Comprehensive Pilot Zone” as an exogenous shock to build a Difference-in-Differences model, which helps assess the digital economy’s impact on carbon emissions. Our findings indicate that this policy has an overall effect on carbon emission reduction in the pilot city. We test two channels through which the NBDCPZ affects carbon reduction. One channel is digital infrastructure development, which can inadvertently hinder carbon reduction efforts. Another one is digital technology innovation that helps in reducing carbon emissions. Overall, despite the increase in carbon emissions due to infrastructure expansion under the policy, the resultant carbon reduction effects are more substantial. The technological advancements driven by the policy significantly enhance its effectiveness in reducing carbon emissions. Additionally, using a policy learning model, we identify policy assignment optimization.</p>