Environmental innovation of transportation sector in OECD countries

Climate change is a global concern and transport sector contributes to it significantly. This study aims to identify the factors which contribute to the development of environmental innovation in transport sector and to examine their effects. The analysis is carried out via a panel regression model with a dataset for 23 OECD countries for the period between 1997-2012. Environmental patent data in transportation is used as a proxy for the innovation capacity. The independent variables consist of value added, environmental stringency, CO2 emissions and GDP growth. Empirical exercises suggest that innovation in transport has a positive relationship with CO2 emissions and a negative relationship with environmental stringency. The negative impact of environmental regulation on innovation in transport sector is an important insight. This can be associated with excessive adjustment costs of regulation with respect to benefits of improved efficiency by innovation. Furthermore, innovation may be realized in response to rising fuel prices rather than in response to environmental mitigation policies. The positive effect of CO2 emissions may imply that as the CO2 emission caused by transport sector rises, innovation capacity increases through the search for more energy-efficient vehicles. This study contributes to the literature by analyzing the utilization of technology for environment specifically in the field of transport. The analysis can be conducted in a more comprehensive manner including manufacturing sector. The results might provide some important insights for policy makers as well as executives in transportation sector