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

  • Philippe Aghion
  • Antoine Dechezlepr�tre
  • David Hemous
  • Ralf Martin
  • John Van Reenen

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 GRI 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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