National innovation capacity and the drivers of energy efficiency R&D in the OECD

<p dir="ltr">Achieving COP28′s target to double global energy efficiency improvements by 2030 requires understanding how environmental regulations and market forces jointly shape energy R&D investment. This paper examines how <u>environmental policy</u> stringency and oil prices affect energy efficiency research and development spending across <u>OECD</u> countries (1990–2022) using Method of Moments <u>Quantile Regression</u> (MMQR). We find that environmental policy stringency has increasingly positive effects at higher energy efficiency R&D investment quantiles, supporting Porter's Hypothesis. Contrary to the <u>induced innovation</u> hypothesis, oil price increases consistently depress energy efficiency R&D, suggesting that higher energy costs divert resources from innovation. Additionally, policy effectiveness varies significantly with countries' R&D capabilities; innovation leaders respond more strongly than laggards. These findings have important implications for <u>decarbonization</u> strategies. While stringent environmental policies can drive innovation, their success depends on protecting energy efficiency R&D budgets from oil price volatility and tailoring policies to national innovation capacities. Policy frameworks must shield long-term investments from short-term market pressures while addressing countries’ heterogeneous innovation capabilities.</p><h2>Other Information</h2><p dir="ltr">Published in: Economic Analysis and Policy<br>License: <a href="http://creativecommons.org/licenses/by/4.0/" target="_blank">http://creativecommons.org/licenses/by/4.0/</a><br>See article on publisher's website: <a href="https://dx.doi.org/10.1016/j.eap.2025.05.033" target="_blank">https://dx.doi.org/10.1016/j.eap.2025.05.033</a></p>