Renewable energy and CO2 emissions: Does human capital matter?

Abstract

Numerous investigations have extensively examined the effects of renewable energy on CO2 emissions. However, a majority of previous studies have overlooked the potential nonlinear effects that renewable energy may have on CO2 emissions. These nonlinear effects could be influenced by various factors, including human capital. Regrettably, the existing literature has not adequately explored the role of human capital in this context. Therefore, the objective of this study was to investigate the impacts of different levels of human capital on the relationship between renewable energy and CO2 emissions. To achieve this objective, the study employed a dynamic threshold panel data model encompassing 67 countries, both developed and developing, over the period from 1999 to 2019. The empirical findings revealed a negative impact of renewable energy on CO2 emissions. The study found that there is a threshold effect associated with the human capital index. For developed countries, the threshold value was 3.407, while for developing countries, it was 2.949. When the human capital index exceeded these thresholds, the impact of renewable energy on reducing CO2 emissions was significantly greater. In developed countries, the impact was 4.75 times more effective, and in developing countries, it was 5 times more effective when the human capital index surpassed the threshold. The results also show human capital had a direct negative effect on CO2 emissions. Additionally, the study found that lagged CO2 emissions, fossil fuel energy consumption, population density, GDP, and industrial activities all exerted positive effects on CO2 emissions.