The endogenous technical progress model estimated in this study has a novel functional form that looks at how energy intensity declines as a result of high prices, leading to irreversible improvements in energy efficiency. The long-term outcome of raising energy prices is thus decomposed into a conventional demand response and technological progress. The former comprises both short- and long-run effects as determined by the elasticity and the dynamics of the equation, while innovation is characterized by a continuing decrease in energy intensity while prices are high. The model in effect endogenizes the autonomous energy efficiency improvement or AEEI used in many models. Any long-term emissions scenario is crucially dependent upon the value of the AEEI, as it specifies directly the relationship between energy use and output. In modelling work its value is generally taken at some fairly arbitrary value such as 1% pa varying for different world regions. Whether or not the value chosen accurately reflects existing trends, specifying the value exogenously excludes the possibility of techno- logical development being affected by policy.