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

Author

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  • Aghion, Philippe
  • Dechezlepretre, Antoine
  • Hemous, David
  • Martin, Ralf
  • Van Reenen, John

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 more in clean technologies when they face higher tax-inclusive fuel prices. Furthermore, there is path dependence in the type of innovation both from aggregate spillovers and from the firm's own innovation history. Using our model we simulate the increases in carbon taxes needed to allow clean to overtake dirty technologies.

Suggested Citation

  • Aghion, Philippe & Dechezlepretre, Antoine & Hemous, David & Martin, Ralf & Van Reenen, John, 2012. "Carbon Taxes, Path Dependency and Directed Technical Change: Evidence from the Auto Industry," Climate Change and Sustainable Development 143129, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:143129
    DOI: 10.22004/ag.econ.143129
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    Keywords

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    JEL classification:

    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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