Education Quality, Green Technology and the Economic Impact of Carbon Pricing

Carbon pricing is increasingly used by governments to reduce emissions. One mitigating factor that has received less attention is education quality. If technological change that reduces the reliance of production on emissions is skill-biased, then carbon pricing may increase the skill premium and wage inequality; however, a more elastic skill supply through better education quality may mitigate adverse economic outcomes including wage inequality. Using data on industrial emissions linked to education quality, it is found that cognitive skills are positively associated with employment in industries that rely less on emissions for production and in industries that, over time, have been able to reduce their reliance on emissions