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Where Does Energy R&D Come From? Examining Crowding Out from Environmentally-Friendly R&D

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  • David Popp
  • Richard G. Newell

Abstract

Recent efforts to endogenize technological change in climate policy models demonstrate the importance of accounting for the opportunity cost of climate R&D investments. Because the social returns to R&D investments are typically higher than the social returns to other types of investment, any new climate mitigation R&D that comes at the expense of other R&D investment may dampen the overall gains from induced technological change. Unfortunately, there has been little empirical work to guide modelers as to the potential magnitude of such crowding out effects. This paper considers both the private and social opportunity costs of climate R&D. Addressing private costs, we ask whether an increase in climate R&D represents new R&D spending, or whether some (or all) of the additional climate R&D comes at the expense of other R&D. Addressing social costs, we use patent citations to compare the social value of alternative energy research to other types of R&D that may be crowded out. Beginning at the industry level, we find some evidence of crowding out in sectors active in energy R&D, but not in sectors that do not perform energy R&D. This suggests that funds for energy R&D do not come from other sectors, but may come from a redistribution of research funds in sectors that are likely to perform energy R&D. Given this, we proceed with a detailed look at climate R&D in two sectors – alternative energy and automotive manufacturing. Linking patent data and financial data by firm, we ask whether an increase in alternative energy patents leads to a decrease in other types of patenting activity. We find crowding out for alternative energy firms, but no evidence of crowding out for automotive firms. Finally, we use patent citation data to compare the social value of alternative energy patents to other patents by these firms. Alternative energy patents are cited more frequently, and by a wider range of other technologies, than other patents by these firms, suggesting that their social value is higher.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15423.

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Date of creation: Oct 2009
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Publication status: published as “Where Does Energy R&D Come From? Examining Crowding out from energy R&D," Energy Economics, July 2012, 34(4), 980-991 (with Richard Newell).
Handle: RePEc:nbr:nberwo:15423

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Citations

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Cited by:
  1. Emanuele Massetti & Lea Nicita, 2010. "The Optimal Climate Policy Portfolio when Knowledge Spills Across Sectors," Working Papers 2010.96, Fondazione Eni Enrico Mattei.
  2. Leo Wangler, 2010. "Renewables and Innovation - Empirical Assessment and Theoretical Considerations," Jena Economic Research Papers 2010-002, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Carlo Carraro & Enrica De Cian & Massimo Tavoni, 2012. "Human Capital, Innovation, and Climate Policy: An Integrated Assessment," Working Papers 2012.18, Fondazione Eni Enrico Mattei.
  4. Bronwyn H. Hall & Christian Helmers, 2010. "The role of patent protection in (clean/green) technology transfer," NBER Working Papers 16323, National Bureau of Economic Research, Inc.
  5. Buscemi, Antonino & Yallwe, Alem Hagos, 2011. "It is time to re-think on environment, energy and economics (E3)," MPRA Paper 30998, University Library of Munich, Germany.
  6. Gerlagh, Reyer & Kverndokk, Snorre & Rosendahl, Knut Einar, 2014. "The optimal time path of clean energy R&D policy when patents have finite lifetime," Journal of Environmental Economics and Management, Elsevier, vol. 67(1), pages 2-19.
  7. Bjørner, Thomas Bue & Mackenhauer, Janne, 2013. "Spillover from private energy research," Resource and Energy Economics, Elsevier, vol. 35(2), pages 171-190.
  8. Harrington, Donna Ramirez, 2012. "Two-stage adoption of different types of pollution prevention (P2) activities," Resource and Energy Economics, Elsevier, vol. 34(3), pages 349-373.

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