Energy Efficient R&D Investment and Aggregate Energy Demand : Evidence from OECD Countries

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