The roles of capitals and energy played in the economy and in climate change

Background/Question/Methods Capitalization is criticized as the cause of climate change and the hinder to effective mitigation of climate change (Harrison and Mikler, 2014). Critiques on the failure of conventional capital had been proposed on the neglect of the value of natural capital (Stiglitz, Sen and Fitoussi, 2009a; 2009b). By expanding the definition of capitals, a microeconomic analysis for climate change was included in the present study. The role played by the human capital, conventional capital, energy, and the natural capital on the global warming is addressed. This study empirically investigated the relationships between capitals and aggregate income and carbon dioxide emissions from fossil fuel combustions. The World Bank is cooperated with WAVES (Wealth Accounting and the Valuation of Ecosystem Services), which is a World Bank-led global partnership that aims to promote sustainable development by ensuring that natural resources are mainstreamed in development planning and national economic accounts. A panel of country data is empirically tested for the relationships by using the econometric techniques and data from reliable sources. The macroeconomic data were retrieved from the Database of the Penn World Table 7.1, 8.1, and 9.0. A series of rents of natural resources reported by the World Bank (2017) is used to represent natural capitals in this study, following the study research on the role of natural capital on the economy (Brandt, Schreyer, and Zipperer, 2013: 2015; 2017).

Results/Conclusions The research findings evidenced that the criticism of Harrison and Mikler (2014) are not valid in all circumstances. Capitalization, with respect to human capital and manufacture capital, had contributed to increasing aggregate income and reducing carbon dioxide emissions, when primary energy consumption was introduced as a regressor in the empirical regression. The primary energy consumption persisted its influences on carbon dioxide emissions. The influence to income does not persist. That the primary energy consumption does not persist its influence to income was affirmed as the statistical significance vanished when the variables representing natural capitals were included in the regression. Therefore, on the purpose to mitigation climate change, to make efforts on the structural adjustment for the energy input is critical for reducing carbon dioxide emissions. Exploitation of natural capital is energy intensive activities and consume huge energy and emit carbon dioxide. It is not feasible to including the cross-term of natural capitals and primary energy consumption, due to the heterogeneity in nature capital endowment and exploitation among the panel countries in the present study.