Unraveling the drivers of energy-saving technical change

Diego Känzig and Charles Williamson

No 2984, Working Paper Series from European Central Bank

Abstract: We explore the increasing divergence between economic growth and energy consumption through energy-saving technical progress. Proposing a new measure of energy-saving technology, we study the underlying drivers in a semi-structural model of the U.S. economy. Our analysis shows that energy price shocks reduce consumption and stimulate energy-saving innovation, but also cause economic downturns and crowd out other innovations. Only energy-saving technology shocks can explain the negative co-movement between output and energy use. These sudden efficiency gains emerge as the primary driver of energy-saving technical change. Our findings highlight the importance of fostering energy-saving innovations in transitioning to a low-carbon economy. JEL Classification: E0, O30, Q32, Q43, Q55

Keywords: directed technical change; energy-saving; energy prices; innovation (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-eff, nep-ene, nep-ino and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242984

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