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

Aghion, Philippe; Dechezleprêtre, Antoine; Hemous, David; Martin, Ralf; van Reenen, John

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

Philippe Aghion (), Antoine Dechezleprêtre, David Hemous, Ralf Martin and John van Reenen
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Philippe Aghion: PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CIFAR - Canadian Institute for Advanced Research, Department of Economics, Harvard University, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France

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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, 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.

Keywords: Carbon; Taxes (search for similar items in EconPapers)
Date: 2016-01
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01496920v1
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Citations: View citations in EconPapers (429)

Published in Journal of Political Economy, 2016, 124 (1)

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