Do R&D Spillovers Support Low-carbon Transition? Firm-level Evidence from Finnish Energy-intensive Manufacturing

A structural shift from fossil fuel-based energy systems to renewable, sustainable energy sources critically depends on research and development (R&D) activities at the firm-level. This study examines the contribution of R&D spillovers from other firms to greenhouse gas (GHG) emissions in Finnish energy-intensive manufacturing industries. We link firm-level GHG emissions to financial and innovation data for 230 firms in the pulp and paper, chemicals, non-metallic minerals, and basic metals industries over 2000–2019. We derive emissions-generating functions based on a directional distance function framework, and estimate them using shape-constrained semiparametric regression. Our key result is that R&D spillovers have a strong statistically significant association with the firm-level GHG emissions. However, the signs and magnitudes of the spillovers differ across industries. In the chemical industry, intra-industry R&D spillover is associated with lower emissions, whereas in the pulp and paper and the basic metals industries, intra-industry R&D spillover is associated with higher emissions. These results demonstrate that R&D spillovers do not self-evidently lower emissions, but can also contribute to higher emissions. Our findings also reveal an important channel of inter-industry R&D spillovers through material flows, highlighting the pivotal role of the chemical industry for the GHG abatement in the pulp and paper production and non-metallic minerals industry.