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

Aghion, Philippe and Dechezlepretre, Antoine and Hemous, David and Martin, Ralf and Van Reenen, John (2012) Carbon taxes, path dependency and directed technical change: evidence from the auto industry. CEP Discussion Papers, CEPDP1178. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: CEPDP1178


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.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2012 The Authors
Subjects: H Social Sciences > HJ Public Finance
Sets: Departments > Economics
Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 01 Mar 2013 16:17
Last Modified: 01 Mar 2013 16:17

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