The present paper attempts to analyse the dynamics of energy end-use technology shifts in the household sector in India. The technology shifts can be categorized as naturally occurring shifts (with increasing household incomes and availability of energy carriers) and policy-induced shifts (by creating a favourable environment). Initially, the households energy usage patterns, types of energy carriers and the technologies in use are analysed using the data from the National Sample Survey (1999-2000). The energy consumption is disaggregated according to end-use activity and by income groups for rural as well as urban households. It is observed that large variations in energy use exist across different sections of households-urban/rural, low/high-income groups, etc. Further, the paper provides a methodological framework for the diffusion of energy-efficient technologies, and the implications of such diffusions for the Clean Development Mechanism (CDM). It analyses the reasons for the gap between possible and practical implementation of energy-efficient measures, study the reasons for households not using the cost-effective technologies available to them, the benefits of innovation of energy efficiency, and the required policies and specific proposals for government intervention to achieve the potential for the CDM. (c) 2004 Elsevier Ltd. All rights reserved.