Can Induced Energy Efficiency Save the Planet?

One of the key arguments for carbon pricing is that it will induce additional innovation in green technologies, yet most models used to evaluate carbon pricing policies either completely ignore induced technological change or are dependent on ad hoc assumptions. In this issue of Joule, Wang et al. estimate the historical relationship between improvements in energy efficiency and energy's share of costs. Incorporating this relationship into a standard integrated assessment model effectively reduces the carbon price required to meet emissions reduction thresholds.