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

Aghion, Philippe, Dechezlepretre, Antoine, Hemous, David, Martin, Ralf and Van Reenen, John (2015) Carbon taxes, path dependency and directed technical change: evidence from the auto industry. Journal of Political Economy, 124 (1). pp. 1-51. ISSN 0022-3808

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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.

Item Type:	Article
Official URL:	http://www.press.uchicago.edu/
Additional Information:	© 2015 The Authors
Library of Congress subject classification:	H Social Sciences > HJ Public Finance
Journal of Economic Literature Classification System:	L - Industrial Organization > L6 - Industry Studies: Manufacturing > L62 - Automobiles; Other Transportation Equipment O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development
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)
Funders:	British Academy, Economic and Social Research Council (ESRC)
Date Deposited:	14 Jul 2015 13:32
URL:	http://eprints.lse.ac.uk/62722/

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