Export orientation and domestic electricity generation: Effects on energy efficiency innovation in select sectors

Abstract

Why are some countries developing many energy efficiency innovations, while others are lagging behind? I argue that export orientation and electricity at low variable cost from nuclear and hydropower plants have an interactive effect on energy efficiency innovation. Export-oriented countries have strong incentives to invest in energy efficiency innovation, as they are in a position to export these technology innovations for global markets. But if inexpensive electricity is supplied in a country, the domestic demand for energy efficiency innovation is missing, and so the home market cannot serve as a springboard for international commercialization. I test this theory against international patent data on energy efficiency innovation in insulation, heating, and lighting for 22 OECD countries, 1991–2007. The statistical analysis indicates that export orientation has large positive effects on energy efficiency innovation in countries that do not rely on nuclear and hydroelectricity.