R&D expenditure and energy consumption in OECD nations

Abstract

Abstract We examine the time-varying effect of energy technology R&D spending (R&D) on energy consumption per capita. In doing so, we utilise a data-driven local linear dummy variable estimation (LLDVE) method, which we apply to a panel of OECD nations for the period 1980 to 2014. Our LLDVE estimates point to a time-varying and positive effect of R&D on total energy consumption. We disaggregate energy consumption into non-renewable and renewable energy consumption to determine the heterogenous effects of innovation. On the non-renewable side, R&D shows a positive impact on non-renewable energy consumption, although this is observed since 1998. On the renewable side, the uptake of R&D is associated with positive and significant effects until 1996 where the effect reverts to negative. Our findings suggest that while global energy transformation to renewables has been on the rise, continual technological breakthroughs may promote higher levels of sustainable energy and, thus, help achieve the desired global temperature.