The Most Emission-Intensive Industries Rarely Focus on R&D

In 2022, almost half of all emissions in the United States came from the industry and electric power sectors, the former of which mainly results from the "consumption of fossil fuels for energy" according to data by the Environmental Protection Agency. Other main drivers included personal and commercial transportation by car, ship or plane and the agriculture sector. One path to decrease emissions touted by some experts is strengthening research into methods like carbon capture or reducing emissions directly at the source. However, most industries that generate significant emissions either directly or indirectly seem to put only a fraction of their revenues toward research and development.

The Economics of Industrial Research and Innovation research project undertaken by the European Commission analyzed the 2,500 companies with the highest R&D spending, calculating R&D intensity by dividing the associated costs by annual revenues for 2022. Regarding sector performances, oil and gas producers like Chevron, Petrobras or China Petroleum & Chemical showed a median intensity of 0.3 percent. Electricity, another sector with significant emission volumes, exhibited a median share of 0.8 percent of revenues funneled towards research and development. In both cases, the mean is significantly higher due to a minority of companies overspending on researching new technologies.

Construction and materials companies, which deal with the energy-intensive process of manufacturing cement and other building materials, had a median share of 2.5 percent. This puts the sector 0.3 percentage points above the European average in R&D intensity, which is calculated as a share of GDP rather than revenues. The figures for automakers are unsurprising, seeing as the industry is in full swing to accelerate the phasing-out of combustion engine cars and investing heavily in greener alternatives like battery electric vehicles, plug-in hybrids or hydrogen fuel.

Looking at the top 10 in terms of R&D investment in 2022, seven companies were associated with either hardware or software, with Alphabet, Meta, Microsoft, Apple and Huawei spending between €21 billion and €37 billion. The remaining three spots were claimed by Volkswagen (€19 billion), Roche (€14 billion) and Johnson & Johnson (€14 billion). The tech sectors have the highest R&D intensity, exhibiting median values of 20.7 percent (software and services) and 10 percent (hardware and chips). Just how much of their R&D spend is geared towards mitigating the risks generative AI and the increase in data center usage poses to emission goals along the global supply chain is unclear.