The Green Solow model and the threshold effect of human capital on CO2 emissions

Abstract

By promoting economic growth, human capital may contribute to the rise in CO2 emissions, but it may also stimulate emission-reducing technologies. Starting from a Green Solow model augmented with human capital, we show that the former effect dominates the latter when human capital is below a critical value, while the opposite is true when human capital becomes sufficiently high. We also find that this result may delay the observability of an EKC and that human capital is more important than savings and depreciation rates in predicting CO2 growth. This evidence has relevant policy implications regarding which factors should be considered to mitigate carbon emissions.