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

75 Pages Posted: 7 Dec 2012 Last revised: 24 Apr 2023

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Antoine Dechezleprêtre

London School of Economics & Political Science (LSE)

David Hémous

University of Zürich; Centre for Economic Policy Research (CEPR)

Ralf Martin

London School of Economics & Political Science (LSE) - Department of Economics; Imperial College Business School

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: December 2012

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 and Dechezleprêtre, Antoine and Hemous, David and Martin, Ralf and Van Reenen, John Michael, Carbon Taxes, Path Dependency and Directed Technical Change: Evidence from the Auto Industry (December 2012). NBER Working Paper No. w18596, Available at SSRN: https://ssrn.com/abstract=2186325

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Antoine Dechezleprêtre

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

David Hemous

University of Zürich ( email )

Zürich
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ralf Martin

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
42
Abstract Views
1,048
PlumX Metrics