The influence of public R&D and knowledge spillovers on the development of renewable energy sources: The case of the Nordic countries

Energy innovation is a key requirement to limit global warming and tackle climate change in the years to come. A better understanding of the public R&D mechanism is likely to improve allocation of resources for energy innovation. Thus, the present paper evaluates the impacts of public R&D and knowledge spillovers on the development of renewable energy sources. To achieve this goal, knowledge flow has been modeled as a function of public R&D expenditures, cumulative knowledge stocks and knowledge spillovers. To show the application of the model, the Nordic countries as one of the pioneers in renewable technologies have been chosen. Results show the cumulative knowledge stock will increase to 2.4 billion USD until 2030, by focusing on biofuels, solar and wind energy. Results also indicate that the knowledge spillovers reduce the domestic R&D investment and may strengthen the knowledge stock. These impacts of knowledge spillovers are more effective when the absorptive capacity of the country becomes greater. The model helps policy makers to design effective policies for creating a balance between domestic R&D expenditures and knowledge spillovers. Finally, some important policy insights and some recommendations for further research are concluded.