The impact of R&D expenditures on CO2 emissions: Evidence from sixteen OECD countries

This study analyzes the impact of research and development (R&D) expenditures on CO2 emissions in 16 Organisation for Economic Co-operation and Development (OECD) countries for the period between 1981 and 2014. The estimates of long-run regression models show that the expected average effect of R&D expenditures on CO2 emissions is negative. Growth of R&D investments by 1% reduces CO2 emissions by 0.09%-0.15% on average. However, estimated country-specific regressions indicate that the long-run effect of R&D expenditures on CO2 emissions can be both positive and negative, and they vary from -0.79% in Denmark to 0.52% in Belgium. In other words, in most cases, viewed from a long-term perspective, higher R&D expenditures reduce CO2 emissions, but this does not apply to about 40% of countries. In addition, the estimation of the short-run time-varying coefficient panel data models indicated that R&D impact can be positive, negative, but also neutral (insignificant) for many years. Such findings suggest a conclusion that the effect of R&D investments on CO2 emissions cannot be characterized as negative in advance, as pointed out by numerous analysis, but must be empirically estimated. The practical significance of this study is reflected in the fact that it directs decision-makers to concentrate their efforts on promoting R&D programs, such as those in the US and Germany, which are directly focused on reducing CO2 emissions and increasing the use thereof. (c) 2019 Elsevier Ltd. All rights reserved.