Climate change response, including the implementation of the Kyoto targets as the first step, calls for technological innovation of future sustainable energy systems. Based on the Danish case, this paper evaluates the type of technological change necessary. During a period of 30 years, Denmark managed to stabilize primary energy supply, and CO2 emissions decreased by 10%, during a period of 20 years. However, after the introduction of the Kyoto Mechanisms, Denmark has changed its strategy. Instead of continuing the domestic CO2 emission controls, Denmark plans to buy CO2 reductions in other countries. Consequently, the innovative technological development has changed. This paper evaluates the character of such change and makes preliminary recommendations for policies to encourage the use of the Kyoto Mechanisms as an acceleration of the necessary technological innovation. (C) 2006 Published by Elsevier Ltd.