Energy Policy 97, 27–38 (2016)

Technological innovation in the energy sector plays an important role in contributing to global security of supply. However, little research has been conducted on the interplay between fossil fuel rents — the difference between resource production at world prices and their total cost in percentage of gross domestic product (GDP) — and research and development (R&D) expenditure, particularly in developing economies. Now, Elina Brutschin from Webster University and Andreas Fleig from Heidelberg University use a Poisson process to model R&D expenditure and patent grants in 116 countries between 1980 and 2012, finding that countries such as China, Brazil, India and Turkey represent a growing share of patent activities in the energy sector.

Extending the analysis beyond the traditional OECD (Organisation for Economic Co-operation and Development) economies, the researchers find that higher oil prices are associated with an increase in R&D expenditure in oil-importing countries, whereas an increase in the fossil fuel rents is associated with a decreasing number of patents in exporting countries. GDP is positively correlated with R&D expenditures, as expected. The study highlights the rising weight of emerging economies in R&D in the energy sector and is consistent with the ‘resource curse’ literature, confirming the complexities in transforming resource rents into productive assets. It also improves our understanding of the uncertain, nonlinear effects that commodity prices might have on energy innovation.