Innovation for sustainability: The impact of R&D spending on CO2 emissions

In recent decades the sustainability of economic growth has become a critical objective for most world economies. To achieve this objective it is necessary to stabilize or reduce Green House Gas emissions, which involves making a transition to a low or zero carbon production system. Within this framework, innovation has emerged as a key factor in achieving an efficient energy market and, at the same time, ensuring the sustainable development of any economy. The main objective of this work is to empirically verify that efforts in innovation have a positive effect on reducing CO2 emissions. To this end, an econometric model has been estimated. The scope of this work includes the European Union (15), the United States and China between 1990 and 2013. The estimate is performed using a linear regression by ordinary least squares using as independent variables the expenditure on R&D and the energy consumption. The results of the model support the hypothesis that spending on research and development contributes positively to the reduction of CO2 emissions for developed countries. Regarding the regions, the corrective effect in the European Union (15) compared to the figures in the United States is highlighted. With regard to energy consumption, the results show that this variable is linked to the growth of CO2 emissions so that increases in energy consumption translate into an increase in emissions. Again, European Union (15) is where the effect of this variable is the lowest, followed by the United States where energy consumption is more polluting. The results obtained for China are quite different, due to its economic and environmental performance. The results obtained provide additional arguments for public policy makers to promote research and development expenditure, both public and private. Since the net effects of innovation translate into a reduction of emissions, this appears as a suitable tool in the fight against climate change. In addition, our study highlights the need to reinforce measures to achieve a decoupling between energy consumption and emissions. In conclusion, this work shows that R&D spending can be recommended, not only as an engine of economic growth of any economy, but as a driver of sustainable development, where growth can be reconciled with lower CO2 emissions. (C) 2017 Published by Elsevier Ltd.