The impacts of R&D investment and stock markets on clean energy uses and CO2 emissions in a panel of OECD economies

Abstract

The goal of this paper is to examine to what extent R&D investment and stock market development promote clean energy consumption and environmental protection across a panel of 30 OECD economies. Based on the IPAT theoretical approach, study employs robust panel econometric models which account for cross-sectional dependence in the analysis and uses annual data, spanning the period 1996 to 2013. The empirical results illustrate that R&D and stock market have a significant long-run equilibrium relationship with clean energy and CO2 emissions. The long-run elasticities display that R&D and stock market growth have a significant positive impact on clean energy consumption, while they have a negative effect on the growth of CO2 emissions. Given these findings, the paper suggests that the policy makers in the OECD economies should realize that it is worth investing in R&D activities as it is promoting the use of clean energy and ensuring low carbon economies. Therefore, the policymakers have to initiate effective policies to promote R&D activities and also encourage the firms that are listed in the stock market to adopt environmental friendly policies.