The influence of natural gas (De)regulation on innovation for climate change mitigation: Evidence from OECD countries

Many studies have examined deregulation as a market tool for competition and efficiency enhancement, but climate change mitigation has hardly been pursued. This paper utilizes the staggered difference-in-difference (SDID) method on the panel of 17 OECD countries for 1985-2017. Authors progressively compare countries that have deregulated their natural gas sector and otherwise to single out the impact on the innovation related to carbon capture, storage, and sequestration(CCS). The SDID approach enables authors to provide evidence for the entire spectrum of liberalization, which has implications for both developed and developing economies. Focusing on carbon capture and storage(CCS) innovation also helps introduce net-zero emission relevance. The empirical results show following the liberalization of the natural sector, deregulation promotes CCS innovation, implying it can promote climate change action. Authors also find that the deregulation effects on CCS innovation among the OECD countries are driven by those with relatively low natural gas regulation, natural gas net-exporters and high input innovation performance in global innovation ranking. In general, (1) our results highlight the role of the regulatory environment and liberalization process in explaining the disparity conclusion of the influence of energy sector deregulation on innovation in extant literature. (2) show potential for natural gas deregulation -lagging economies to accelerate net-zero emission with the market liberalization. (3) suggest augmenting country policy with a market mechanism to accelerate climate change mitigation technologies, among other policy implications.