Prof Inglesi-Lotz' article in Energy Policy

All proposed solutions, suggestions, and policies towards a global future that is sustainable, without energy security concerns, and with minimized environmental consequences have three important common interconnected factors: innovation, technology, research and development (R&D). Appreciating this, the importance of investment in R&D in the energy sector is unquestionable. Additionally, the overall impact of an appropriately allocated R&D expenditure to the economy is certainly positive, aiming at affecting the overall return from such an investment by both public and private sectors. Prof Inglesi-Lotz in her paper titled “Social rate of return to R&D on various energy technologies: where should we invest more? A study of G7 countries” published in 2017 at Energy Policy, explains that “the nature and potential of various energy technologies that are capable of improving the energy and environmental conditions globally is a challenging task for governments and policy makers that have to make decisions on the allocation of funds in R & D”. The aim of doing so, is to estimate the social rate of return of R & D on various energy applications and technologies such as energy efficiency, fossil fuels, renewable energy sources, and nuclear for the G7 countries by using panel data estimations.

The results show that primarily R & D investment on energy efficiency technologies and nuclear are the ones that yield high social benefits for all G7 countries, while exactly the opposite holds for fossil fuels- so clearly, one policy does not fit all. Policy makers can count on promoting R & D in the fields of energy efficiency and nuclear energy in giving them high social returns. They should hence rethink on distinguishing the investment accordingly. The results by no means suggest that R & D investment should be quitted for other energy technologies that do not improve energy efficiency and nuclear production. To the contrary it may be argued that the lack of sufficient and properly directed R & D investment in other categories of energy R & D are the main reasons for the absence of social returns. One should always keep in mind though that our estimates are lower bound and the need for funding nationally and internationally as well as the need for incentives may be even greater. More research should be done in order to investigate how spillovers between countries affect the impact of R & D expenditure to technological progress and economic growth.