An alternative formulation of the fossil fuel con- sumption equation was also estimated, including an endogenous technological change term in place of the deterministic trend. This model allows the ef- fects of price induced technical innovation and structural economic change to be included, allowing the impacts of policies on the decline in energy intensity in the long term to be assessed. It is shown that the long-run effects of a carbon tax in stimulat- ing innovation in energy efficiency significantly in- creases the impact of the tax over the reduction due to direct demand elasticity.