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Sovereign Wealth Funds and Long-Term Investing$
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Joseph Stiglitz, Patrick Bolton, and Frederic Samama

Print publication date: 2011

Print ISBN-13: 9780231158633

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231158633.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 05 June 2020

Influencing Clean Innovations

Influencing Clean Innovations

(p.164) Influencing Clean Innovations
Sovereign Wealth Funds and Long-Term Investing

Philippe Aghion

Columbia University Press

Empirical analysis of innovation and patenting in the automotive industry has shown the existence of a so-called path dependence in the direction of technical change. Specifically, a study of the dynamic of patenting in clean versus fuel-consuming cars showed that individuals or companies that have in the past pursued dirty innovations tend to continue to innovate along that path. This in turn suggests a role for government intervention: namely, to redirect technical change from dirty to clean innovation. Without intervention, not only will there be more pollution by car producers and other fuel-consuming industries, but the technological gap between dirty and clean innovation will increase, thereby making it more costly to intervene tomorrow. This chapter argues that efficient dynamic allocation can be implemented by a combination of the carbon tax (which directly deals with current environmental externalities) and research subsidies to clean innovation and the diffusion of clean technologies (to deal with the knowledge externality and with environmental externalities in the future).

Keywords:   automotive industry, innovation, patenting, technical change, carbon tax, research subsidies, clean technologies

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