Energy technology innovation and decarbonisation: The moderating effect of political corruption

This paper investigates how political corruption moderates the effectiveness of public investment in research and development (R&D) for energy technologies in driving decarbonisation. Using annual panel data for 25 OECD countries (1990–2022), we apply a two-stage instrumental variable approach that accounts for endogeneity and unobserved common factors. Our results show that increased public R&D investment in energy technologies significantly reduces greenhouse gas emissions. However, this effect is weakened in countries with higher levels of political corruption, suggesting that it shapes the returns to energy innovation. A sector-level analysis reveals heterogeneous emission responses to R&D, particularly within hard-to-abate sectorst. These findings underscore the need for integrated climate strategies that also address political corruption as a key barrier to accelerating the clean-energy transition.