Deshmukh, Rupa. Private sector innovation in biofuels in the United States: induced by prices or policies. Retrieved from https://doi.org/doi:10.7282/T3HQ407N
DescriptionIt has been shown in recent years that high energy prices induce investments in energy research. $100/barrel oil, strategic concerns, concerns about global warming, and pork barrel politics has also rekindled the enthusiasm of the public and government for policies that encourage research and innovation on biofuels. We look at the biofuels supply chain to identify which components of that chain are conducting biofuel research and how prices and policies might stimulate research and innovation. This paper is a first attempt to develop an econometric model to measure how innovations as measured by ethanol related patents have responded to high oil prices and to government policies. We look at the both demand-side factors such as federal policies subsidizing ethanol production or mandates for the use of biofuel and supply-side factors such as government funding for biofuel research. We find that both oil prices and federal research grants have significant positive effects on innovation. However, the size of the ethanol market has a negative effect as do federal tax credits, with mandates being insignificant.