Annex C. Cross-country Fuel Taxes and Vehicle Emission Standards

This case study looks at the effect of emissions regulations, fuel efficiency standards, petrol prices and petrol taxes on innovation in the motor vehicle industry, focusing on the United States, Germany and Japan. The study finds that regulations on emission standards have generally induced innovation in related areas (for example, nitrous oxide emission regulation and innovations in engine design). The effects of petrol prices and petrol taxes on patenting are not as straightforward. Fuel taxes (which can be predicted) had an impact on innovations related to fuel efficiency, whereas petrol prices and fuel efficiency standards did not. However, further analysis of the interplay of taxes and prices highlight some of the empirical issues that result from analysing the innovation impacts of taxation.