The role of labor and capital in the generation of CO2 emissions

What is it about?

Our research showed that for the world's leading emitters of China, India, and the United States, compared to the fixed capital usage, the employment of the primary input of labor induces a larger amount of carbon emissions. Therefore, along with better management and utilization of fixed capital resources, the focus should be on labor training and reallocation of labor from highly carbon-intensive to less carbon-intensive industries (sectors). Furthermore, unclean imports and financial services to major carbon-importing sectors should be strictly supervised.

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Photo by Rob Lambert on Unsplash

Photo by Rob Lambert on Unsplash

Why is it important?

First, this study fills a crucial research gap by presenting the labor and capital-induced carbon emissions and inter-sectoral carbon linkages of the world's top three CO2 emitting nations. This comparative presentation of China, India, and the USA’s industrial producer responsibility based on their employment of primary resources creates an interesting scenario. This is because these three nations have different economic structures and levels of economic development. This selection of major economies with different structures and levels of economic development can help in the generalization of results to other developed countries and developing economies at different levels of economic development. Second, keeping in view the general scarcity of literature and various issues with the existing related methods, this study remodifies the MHEM method and proposes the supply-side MHEM method (SMHEM) for estimating the supply-side net linkages. The SMHEM method proposed in this study decomposes the supply-induced industrial linkages into supply-induced inter-sectoral carbon input, supply-induced inter-sectoral output, supply-induced intra-sectoral sales, and supply-induced mixed emissions. Third, this study introduces supply-induced inter-sectoral input linkages which further adds to the novelty of this study. Fourth, this study introduces the concept of supply-induced mixed emissions. Fifth, this study examines separately the supply-induced effects of labor and capital on direct and indirect emissions, which is generally not true for the limited literature estimating supply-driven carbon and pollutant linkages.

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