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Carbon taxes, path dependency, and directed technical change: evidence from the auto industry


Aghion, Philippe; Dechezleprêtre, Antoine; Hémous, David; Martin, Ralf; Van Reenen, John (2016). Carbon taxes, path dependency, and directed technical change: evidence from the auto industry. Journal of Political Economy, 124(1):1-51.

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, hybrid, and hydrogen) patents across 80 countries over several decades. We show that firms tend to innovate more in clean (and less in dirty) technologies when they face higher tax-inclusive fuel prices. Furthermore, there is path dependence in the type of innovation (clean/dirty) both from aggregate spillovers and from the firm’s own innovation history. We simulate the increases in carbon taxes needed to allow clean technologies to overtake dirty technologies.

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, hybrid, and hydrogen) patents across 80 countries over several decades. We show that firms tend to innovate more in clean (and less in dirty) technologies when they face higher tax-inclusive fuel prices. Furthermore, there is path dependence in the type of innovation (clean/dirty) both from aggregate spillovers and from the firm’s own innovation history. We simulate the increases in carbon taxes needed to allow clean technologies to overtake dirty technologies.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2016
Deposited On:14 Apr 2016 15:51
Last Modified:01 Feb 2017 01:02
Publisher:University of Chicago Press
ISSN:0022-3808
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1086/684581
Official URL:http://www.journals.uchicago.edu/doi/abs/10.1086/684581

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