Working Paper: NBER ID: w18596
Authors: Philippe Aghion; Antoine Dechezleprêtre; David Hemous; Ralf Martin; John Van Reenen
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.
Keywords: carbon taxes; technical change; auto industry; clean technologies; dirty technologies
JEL Codes: L62; O13; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher fuel prices (R48) | increased clean innovation (Q55) |
| higher fuel prices (R48) | decreased dirty innovation (O39) |
| history of clean innovation (Q55) | increased clean innovation (Q55) |
| history of dirty innovation (O36) | increased clean innovation (Q55) |