The impact on domestic CO2 emissions of domestic government-funded clean energy R&D and of spillovers from foreign government-funded clean energy R&D
2022
Herzer, Dierk
There is scientific consensus that the risk of catastrophic global warming can be avoided only if global CO₂ emissions are dramatically reduced. To the extent that government-funded clean energy R&D in one country not only reduces CO₂ emissions in that country but also lowers CO₂ emissions in other countries through international spillovers, such R&D can play an important role in reducing this risk. Whether and how domestic and foreign government-funded clean energy R&D affect domestic CO₂ emissions is thus an important research question, which, however, is largely unexplored. The purpose of this study is therefore to examine the effects of domestic and foreign government-funded clean energy R&D on domestic CO₂ emissions. Specifically, we examine the role of environmental goods imports as a channel of international R&D spillovers. Using non-stationary panel techniques, we find in data from the G7 countries over the period 1994–2018 that both domestic and foreign government-funded clean energy R&D have measurable negative effects on domestic CO₂ emissions and that spillovers from foreign government-funded clean energy R&D occur through imports of environmental goods. We conclude from our findings that government-funded clean energy R&D can indeed play a significant role in reducing the risk of catastrophic global warming.
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