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Carbon Taxes, Path Dependency and Directed Technical Change: Evidence from the Auto Industry

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  • Philippe Aghion
  • Antoine Dechezleprêtre
  • David Hemous
  • Ralf Martin
  • John Van Reenen

Abstract

Can directed technical change be used to combat climate change? We construct new firm-level panel data on auto industry innovation distinguishing between “dirty” (internal combustion engine) and “clean” (e.g. electric and hybrid) patents across 80 countries over several decades. We show that firms tend to innovate relatively morein clean technologies when they face higher tax-inclusive fuel prices. Furthermore,there is path dependence in the type of innovation both from aggregate spillovers andfrom the firm’s own innovation history. Using our model we simulate the increasesin carbon taxes needed to allow clean to overtake dirty technologies

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Paper provided by Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 102.

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Date of creation: Nov 2012
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Handle: RePEc:lsg:lsgwps:wp102

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