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Technology and energy substitution: A path toward climate change mitigation

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  • Çakır-Melek, Nida
  • Orak, Musa

Abstract

Mitigating climate change is critically linked to reducing an economy’s reliance on fossil energy. This paper examines U.S. energy dependence, measured by its factor share, using a neoclassical framework systematically. We present substitution across production inputs as a simple, explicit mechanism for climate-change mitigation and for interpreting energy-saving technical change. Allowing capital equipment–energy substitutability to vary over time, we find that changes in observed factor quantities can account for most low-frequency movements in the U.S. energy share over 1963–2019. Policies that foster access to and quality of capital equipment, and that account for dynamic substitutability between equipment and energy, can therefore support progress toward environmental goals.

Suggested Citation

  • Çakır-Melek, Nida & Orak, Musa, 2026. "Technology and energy substitution: A path toward climate change mitigation," European Economic Review, Elsevier, vol. 186(C).
    • Handle: RePEc:eee:eecrev:v:186:y:2026:i:c:s001429212600070x
    DOI: 10.1016/j.euroecorev.2026.105326
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    Keywords

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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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