The objective of this paper is to compare the economic effects of innovation in an unconventional oil industry, based on Estonian and Canadian experiences with oil shale and oil sands, respectively. Both unconventional oil resources face similar challenges and need to resolve these through innovation. Based on empirical evidence, this paper concludes that innovation is a key mechanism of increasing efficiencies and triggering investments. Investments themselves, due to their nature, represent the best measure of the economic effect of cumulative innovation in the unconventional hydrocarbons industry.
The paper proceeds in the following manner. First, we will briefly review the relevant literature and identify definitions of innovation and its impact on economic growth. In the second part, we will point out the effects of innovation in the energy industry on economic growth, and the uniqueness of energy innovation. Then we will present data on public and private R&D expenditure in the oil sands industry in Canada, as well as evidence of the results and economic effect comparatively to the R&D effort in Estonian oil shale industry. Lastly, we will draw conclusions by discussing our findings. The results are relevant to indicate R&D expenditure necessary to sustain investments and economic effects of developing unconventional hydrocarbon mineral resources.
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Interview with VKG Development Director Meelis Eldermann, 21.09.2016 (in Estonian)
