Human Capital Formation and Global Warming Mitigation : Evidence from an Integrated Assessment Model

Whereas the linkage between technology and climate policy has been extensively analysed, the interaction between climate policies and human capital formation has received considerably less attention. Human capital is a determinant of economic growth and, at the same time, it affects the efficiency of responses to climate change. Based on recent empirical evidence, this paper includes human capital and knowledge in a state-of-the art integrated assessment model. Introducing human capital makes it possible to assess the interplay between innovation, human capital, limate change, and education policies. Results indicate that climate policy stimulates a dedicated form of energy-knowledge without reducing generic R&D investments. Since advancements in labour productivity have a negative impact on the environment because labour is assumed to be complement to energy, climate policy reduces education investments, on which human capital is built. However, inspection of a policy mix combining climate and education targets shows that education and climate goals can be coupled incurring in small additional economic penalties. We thus provide evidence that apparently opposing policy goals can and should be pursued together. We also provide a preliminary investigation of knowledge stimulating education