The Effect of Oil Prices on Patents in Renewable Energy : A DTC Approach

Sammanfattning: Although a majority of researchers and policymakers are aware of the need to transition towards renewable energy to tackle climate change, the world is still much dependent on fossil fuels. Using directed technical change (DTC) as a theoretical framework, this thesis aims at understanding how the oil price can direct innovations towards technologies related to renewable energy. The hypothesized relationship is investigated empirically using macro-level panel data for 21 OECD-countries overthe years 1990-2015. The main finding, which is robust to changes in the model specification, show that fluctuations in oil prices have had a significant impact onthe relative patenting in renewable energy. Since oil prices are difficult to model and decided exogenously, this result indicate that the direction of innovations might be difficult to manipulate and control. Also, using the oil price as a tool to transition towards renewable energy can be difficult from a policymakers point of view due to the tough political debate surrounding the pricing of energy. However, the results from this thesis can hopefully spur further research examining the determinants of oil price fluctuations more closely to understand how its link with the direction of innovations can be of greater practical importance. Also, more refined research can be conducted in line with this thesis to permit more precise predictions regarding the role of oil price in the transition towards renewable energy in electricity production.