Discussion paper
DP19656 Energy-Saving Technology Shocks, Emissions, and the Macroeconomy
We use restrictions derived from frontier models of directed technical change to identify an energy-saving technology shock in a Bayesian structural VAR of the U.S. economy. This shock is associated with a persistent reduction of the carbon intensity of output. It also leads to a delayed but strong increase of GDP which gives rise to substantial additional fossil fuel consumption and new emissions. As a result, per capita emissions fully rebound after an initial decline. These effects can largely be attributed to a substitution of fossil fuel end-use by electricity, much of which has historically been generated using fossil fuels.
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