Human capital and CO2 emissions in the long run

Using a unique historical dataset for 20 OECD economies from 1870 to 2014, we study whether human capital accumulation is associated with improvements in environmental quality via reductions in CO2 emissions. Our preferred long-run point estimates, which account for cross-sectional dependence and structural breaks, suggest that advanced human capital, in the form of additional tertiary schooling, is linked to CO2 emissions and that an additional year of tertiary schooling is associated with a reduction in CO2 emissions between 50.1% and 65.8%, depending on the specification. When we estimate the relationship between human capital and CO2 emissions non-parametrically, we find that the association between human capital and CO2 emissions is time-varying, that it switched from positive to negative in the 1950s and became more strongly negative thereafter. The time-varying estimates reflect heterogeneity in the relationship between different levels of human capital and CO2 emissions and the growth in investment in higher education in the OECD since the 1950s. Our findings provide evidence of the social benefits of investing in advanced human capital and suggest a promising avenue for addressing climate change without impeding economic growth.