Energy security and climate change: How oil endowment influences alternative vehicle innovation

Abstract

Fast growing global energy needs raise concerns on energy supply security and climate change. Although policies addressing the two issues sometimes benefit one at the expense of the other, technology innovation, especially in alternative energy, provides a win–win solution to tackle both issues. This paper examines the effect of oil endowment on the patterns of technology innovation in the transportation sector, attempting to identify drivers of technology innovation in alternative energy. The analysis employs panel data constructed from patent data on five different types of automobile-related technologies from 1990 to 2002: oil extraction, petroleum refining, fuel cells, electric and hybrid vehicles (EHV) and vehicle energy efficiency. I find that countries with larger oil endowments perform less innovation on refining and alternative technologies. Conversely, higher gasoline prices positively impact the patent counts of alternative technologies and energy efficiency technology. The findings highlight the challenges and importance of policy designs in international climate change agreements.