Abstract
The relationship between energy technology R&D and energy consumption has remained an unsettled empirical issue. This study investigates whether accumulative energy technology R&D investments have contributed to decreases in final energy and fossil fuel consumption in 19 OECD countries over the period 1975–2020. We ask whether an increase in energy technology R&D stocks has contributed to decreases in final energy and fossil fuel consumption and hence may effect energy savings. Methodologically, we treat the accumulation and depreciation of energy technology R&D investments as R&D stocks, and we use state-of-the-art estimation methods for dealing with cross-sectional dependence, nonstationarity, heterogeneity and time-varying coefficients that often plague panel-time-series models. Across our heterogeneous dynamic models, we find those estimators that properly account for cross-sectional dependence yield negative and significant coefficients on energy technology R&D stocks. Our time-varying estimates on energy technology R&D stocks confirm the above findings and feature two turning points—i.e., the 1979 oil shock, the Fukushima accident—in effecting energy savings. These two turning points provide strong evidence that the sample countries are subject to common shocks. The evidence we present supports the environmental sustainability orientated view that energy technology R&D is playing a prominent role in making energy savings.
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Notes
Australia, Austria, Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the UK, and the USA.
The Kuznets curve specification is not appropriate for panel-time-series models, because powers of integrated processes are themselves not integrated processes (Wagner 2015). If variable time series are integrated (nonstationary), then the panel implementations of nonlinearity in the Kuznets curve (squared GDP per capita terms) are invalid, because the transformed variable is not defined in the (co-)integration framework.
The IEA data report expenditures on demonstration activities in a very vague and sparse manner. It is almost impossible to sort out those expenditures from the rest in the annual energy technology R&D budgets.
In this study, we assume that the annual energy technology R&D stock depreciation rate is 10%. We estimated the same models using R&D stocks based on different depreciation rates (i.e., 5% and 15%). The results (unreported) remained qualitatively the same.
Unreported CIPS tests with the first differences of the panel variables indicate that the null hypothesis is strongly rejected. The results are available on request.
The findings of Eberhardt et al. (2013) are comparable—the estimate for the R&D capital stock drops substantially in magnitude and is no longer statistically significant when spillovers in the form of cross-sectional dependence are accounted for in their dynamic models.
We would also like to consider using the time-varying interactive fixed-effects estimation (Casas et al. 2021)—a semiparametric extension of Pesaran (2006)—if that procedure did not break down following the removal of the problematic R-package phtt (Panel data analysis with heterogeneous time trends) from the CRAN repository.
Table 3 column (1) of that article reported near-zero, insignificant estimates for the lagged dependent variable and insignificant estimates for the current and once-lagged levels of R&D spending, yet the long-run coefficient on R&D spending was significant at the 10% level.
See Figs. 1 and 2 of that article.
See Table 3 column (1) of that article.
See Footnote 9. Gao et al. (2021) utilized the same energy price index.
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Acknowledgements
This work was supported by the Japanese MEXT [Monbu Kagakusho] under Grant-in-Aid for Scientific Research (B) [Project/Area Number 22H01712] and (C) [Project/Area Number 17K03581].
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Ikegami, M., Wang, Z. Does energy technology R&D save energy in OECD countries?. Econ Change Restruct 57, 84 (2024). https://doi.org/10.1007/s10644-024-09588-y
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DOI: https://doi.org/10.1007/s10644-024-09588-y