THE DYNAMIC IMPACTS OF FINANCIAL DEVELOPMENT AND HUMAN CAPITAL ON CO2 EMISSION INTENSITY IN CHINA: AN ARDL APPROACH

This paper studies the dynamic impacts of financial development, human capital, and economic growth on CO2 emission intensity in China for the period 1978-2015, with a structural breakpoint in 1992, by employing an autoregressive distributed lag (ARDL) approach. The estimations show that there exists a long-run cointegration linkage among the variables, with three main findings. First, financial openness measured by net FDI inflows can significantly reduce CO2 emission intensity in both the short-term and the long-term, whereas the effects of both financial scale and financial efficiency are limited and insignificant. Second, there exists an inverted N-shaped relationship between human capital and CO2 emission intensity: improving human capital first decreases CO(2)emission intensity (before 1992), then increases it in the short-run (after 1992), and, finally lessens it in the long-run. Last, raising per capita income can also significantly lower CO2 emission intensity in the long-run. Accordingly, some policy implications are also discussed.