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

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...

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Bibliographic Details
Published in:NBER Working Paper Series 2012-12, p.18596
Main Authors: Aghion, Philippe, Dechezleprêtre, Antoine, Hemous, David, Martin, Ralf, John van Reenen
Format: Article
Language:English
Subjects:
Automobile industry
Carbon dioxide
Clean technology
Climate change
Climate science
Economic theory
Economics
Emissions
Environmental policy
Environmental tax
Greenhouse effect
Greenhouse gases
Innovations
Per capita
Studies
Taxes
Technological change
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Summary: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.
ISSN:0898-2937
DOI:10.3386/w18596