This paper examines the impact of energy prices on energy-efficient innovations using U.S. patent data from 1970 to 1994. The study combines demand-side factors, such as energy prices, with supply-side factors, such as scientific advancements, to understand technological change. Patent citations are used to measure the usefulness of existing scientific knowledge, and these citations are combined with demand-side factors to estimate a model of induced innovation in energy technologies. The results indicate that both energy prices and the supply of knowledge have significant positive effects on innovation. The paper concludes by discussing the implications of these findings for environmental policy, emphasizing the importance of considering both market demand and technological opportunity in modeling induced innovation.This paper examines the impact of energy prices on energy-efficient innovations using U.S. patent data from 1970 to 1994. The study combines demand-side factors, such as energy prices, with supply-side factors, such as scientific advancements, to understand technological change. Patent citations are used to measure the usefulness of existing scientific knowledge, and these citations are combined with demand-side factors to estimate a model of induced innovation in energy technologies. The results indicate that both energy prices and the supply of knowledge have significant positive effects on innovation. The paper concludes by discussing the implications of these findings for environmental policy, emphasizing the importance of considering both market demand and technological opportunity in modeling induced innovation.