The interrelations between human capital investment and emission trading scheme: A case study in China

Human capital affects carbon emissions and thus plays a significant role in emission abatement; however, the role of human capital is usually neglected or biasedly modeled in literature. This paper attempts to bridge the research gap by quantifying the interrelations between human capital investment (HCI) and emission trading scheme (ETS) in a computable general equilibrium research framework, taking China as a case study. The direct emission impact of HCI is measured by autoregressive distributed lag models. This paper's research period is 2021–2030. The results show that educational investment does not impact emissions statistically significantly, while the direct emission impacts of health and R&D investments are statistically significant. Hence, the emission impact of HCI is the aggregated impact of health and R&D investments, whereas the economic impact of HCI is the aggregated impact of educational, health, and R&D investments. Considering its economic and emission impacts, HCI increases labor employment, GDP, and emissions. The ETS weakens the HCI impact on GDP, but HCI strengthens ETS emission abatement. These findings imply that ETS decreases the economic benefits of HCI; human capital could be accumulated to facilitate achieving mitigation targets.