Are research and development on energy efficiency and energy sources effective in the level of CO2 emissions? Fresh evidence from EU data

Climate change and natural resource depletion have reinvigorated the relevance of technical advancements in energy efficiency, which has been emphasized by the Paris Climate Accord that includes a framework for carbon neutrality. In that effort, the governments have been allocating a considerable amount of budget shares to research and development relating to energy efficiency and green energy. Thus, this study primarily examines the impact and effectiveness of research and development on energy efficiency and energy sources (renewables and fossil fuels) on CO2 emissions in the European region using a novel Method of Moments Quantile Regression (MMQR). Our data cover annual observations of 9 EU countries, including Austria, Denmark, Finland, France, Germany, Netherlands, Norway, Spain, and Sweden, based on the period 1990–2021. Our empirical findings confirm that the U-shaped Environmental Kuznets Curve occurs across all quantiles at 1% significance levels. The findings reveal that energy consumption increases CO2 emissions across the lower to higher quantiles. We discover that (i) R&D on renewable energy cuts CO2 emissions just at the median and higher quantiles, (ii) R&D on Fossil Fuels decreases CO2 emissions just at the lower quantile, and (iii) R&D on Energy efficiency lowers CO2 emissions at both the median and higher quantiles. Therefore, empirical findings suggest that policymakers should maintain their incentives for energy efficiency R&D and renewable R&D to achieve sustainable development goals.