R&D Investments in Energy Efficiency, Economic Impact, and Emissions Abatement

Despite the small share in total energy investments, energy investments in research and development (R&D) incubate early-stage energy technology, improve energy efficiency in the manufacturing processes, and facilitate the expansion of green energy systems. This chapter distinguishes R&D investments in energy efficiency from other energy R&D investments. Our research formulates the way in which R&D investments in energy efficiency enhance energy production through efficiency knowledge accumulation. Our research explores how R&D investments in energy efficiency affect the other types of energy R&D investments, total energy R&D investments, and the share of energy R&D investments in the capital goods sector. Also, the study examines the impact of R&D investments in energy efficiency on economic welfare, economic structure, carbon taxes, energy transition, carbon emissions, and climate change. The study simulates three emissions abatement scenarios: an optimal abatement scenario, a 2 °C policy scenario, and a 1.5 °C policy scenario. Our study provides a reference level for the amount of R&D investment in energy efficiency. Policy makers may overinvest in other energy R&D investments under all abatement scenarios if they overlook R&D investments in energy efficiency. R&D investments in energy efficiency also bring considerable economic gains, however, its climate impact is not significant.