David Popp

Department of Economics

The University of Kansas

213 Summerfield Hall

Lawrence, KS 66045

(785) 864-2868

email: dpopp@ukans.edu

August 21, 1998

This paper uses patent data to estimate the effect of new technologies on energy consumption. A stock of energy knowledge is created for each of 13 energy-intensive industries. The median present value of long run savings from a new patent is nearly 9 million dollars. The results are used to simulate the effect of a ten-percent energy tax. Although factor substitution is found to play a greater role than induced innovation in the short run, the energy savings from induced innovation play a much larger role than factor substitution in the long run, due to the cumulative nature of research.