Energy-saving R&D and carbon intensity in China

Abstract

China's domestic research and development (R&D), an important source of technological progress, is considered one of its most effective implements for cutting carbon intensity. However, few studies have yet focused on R&D in the energy field, or even explored the heterogeneity within energy-saving R&D. Considering its potential significance in yielding more effective environmental policies, this work focuses particularly on energy-saving R&D, which is representative of energy-saving technological progress, and categorizes these R&D activities according to actors and purposes to identify their heterogeneity. A series of estimators, including instrumental variable estimators, a propensity score matching and difference-in-differences estimator, and the generalized method of moments, are applied first. To obtain more detail on how energy-saving R&D influences carbon intensity, a two-step analysis and dynamic panel threshold model are then employed. Since enterprises' motivation for technological change arises from a profit-maximizing purpose, we hypothesize that the activities of enterprises, as opposed to universities or individuals, could produce more noticeable impacts on carbon intensity reduction. We further hypothesize that utility-type R&D activities are, in practice, more useful in cutting carbon intensity than invention-type R&D and that the technology absorptive capacity plays an important role in the effectiveness of energy-saving R&D activities on carbon intensity. Empirical results based on a Chinese provincial dataset (2000–2016) validate all our hypotheses, which enables us to provide policy suggestions for carbon intensity reduction in China.