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.