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

  • Philippe Aghion
  • Antoine Dechezleprêtre
  • 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 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18596.

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Date of creation: Dec 2012
Date of revision:
Handle: RePEc:nbr:nberwo:18596
Note: EEE
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