Importing Knowledge to Save Energy

It's easy to think that other countries affect a national energy system only as oil and energy exporters, but it's not true, Marzio Galeotti (Iefe Bocconi and Università di Milano) and Elena Verdolini (Università Cattolica di Milano and Feem) claim. In fact, countries can take advantage of the knowledge developed abroad to boost innovations in energy-efficient technologies.

In At Home and Abroad: An Empirical Analysis of Innovation and Diffusion in Energy Technologies, (Journal of Environmental Economics and Management, 61, 119–134, doi: 10.1016/j.jeem.2010.08.004) Galeotti and Verdolini track down the inventor country for 21,668 energy-saving patents granted by the US Patent and Trademark Office in the 1975- 2000 period and investigate, by counting citations, whether technologies developed abroad affect innovations in each of the 38 countries of the sample. It turns out that the world of energy innovation is international and that knowledge spillovers from country to country strongly affect the innovation process.

The scholars, even if focusing on knowledge flows, design a model which highlights the important role of energy prices' hikes as a stimulus to innovation. The availability of new technologies (measured by the number of patents) is equally important and countries can rely on knowledge developed either internally or abroad. There are differences, though, in national dispositions to absorb foreign knowledge.

Knowledge transfer is more likely between countries technologically similar, especially if both of them enjoy an innovative culture; between bordering countries or countries sharing a language; between countries in the same free trade area, because trade is one of the main vehicles of knowledge diffusion.

The features of their model don't allow Galeotti and Verdolini to assess in a conclusive way the effectiveness of public intervention as a stimulus to innovation, but a few clues suggest a positive effect.