Strategic R&D Budget Allocation to Achieve National Energy Policy Targets: The Case of Korea

Abstract

While recent international negotiations about combating climate change have led governments around the world to invest in R&D in the energy sector, funds allocated to R&D investment have remained limited during global economic downturns and dependent on national economic conditions. A systematic approach and strategic budget allocation are required to achieve various national energy policy targets. In this study, we describe the optimal investment portfolio for achieving energy policy targets in Korea based on three budget allocation criteria: past investment performance, expected future effects and additional investment risk. We outline the analytic hierarchical process by which policy target priorities are set, developing a market allocation model to analyse expected future effects and a system dynamics model to calculate the investment volume. The systematic approach suggested in this study can increase the efficiency of budget spending by helping governments make investment decisions based on clear criteria and the results of our quantitative analysis regarding government investment in R&D.