Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2015:14: Department of Economics, Umeå University, S-901 87, Umeå, Sweden www.cere.se CERE Working Paper, 2015:14 Energy efficient R&D investment and Aggregate Energy Demand: Evidence from OECD Countries

Amin Karimu () and Runar Brännlund ()
Additional contact information
Amin Karimu: CERE and the Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Runar Brännlund: CERE and the Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden

Abstract: This paper present a different perspective in the debate on energy efficiency and energy demand by classifying the impact of efficiency measures into direct and indirect effect (rebound effect). It examines the direct effect of energy efficient R&D capital on energy demand. Using a sample of OECD countries, we find evidence of negative own-R&D capital elasticity with respect to energy demand. Moreover, we find evidence of heterogeneity in the predicted impact of energy efficient R&D capital, with the USA having the largest accumulated reduction in energy demand and Portugal with the smallest. Overall, our empirical results suggest a reasonable reduction in energy demand and the associated CO2 emissions from an increase in energy efficient R&D investment based on the direct effect, which differ between the countries, suggesting possible differences in abatement cost and the level of implementation of energy efficient R&D activities.

Keywords: Efficiency Policy; Energy Demand; Heterogeneity; R&D capital; Spillovers

JEL-codes: C33; Q41; Q49

29 pages, December 11, 2015

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