General Equilibrium Rebound from Energy Efficiency Innovation
University of Arizona Department of Economics Working Paper 14-02
59 Pages Posted: 1 Jun 2014 Last revised: 10 Sep 2019
There are 2 versions of this paper
General Equilibrium Rebound from Energy Efficiency Innovation
General Equilibrium Rebound from Energy Efficiency Innovation
Date Written: September 5, 2019
Abstract
Energy efficiency improvements "rebound" when economic responses undercut their direct energy savings. I show that general equilibrium channels typically amplify rebound by making consumption goods cheaper but typically dampen rebound by increasing demand for non-energy inputs to production and by changing the size of the energy supply sector. Improvements in the efficiency of the energy supply sector generate especially large rebound because they make energy cheaper in all other sectors. Quantitatively, improving the efficiency of U.S. non-energy supply sectors by 1% would reduce U.S. energy use by 0.58%, with rebound of 28%. General equilibrium channels increase those savings by 19%; however, they reduce the savings from improving the efficiency of the energy supply sector by 65%.
Keywords: factor productivity, factor intensity, factor bias, efficiency, rebound, backfire, substitution
JEL Classification: D58, O31, O33, Q41
Suggested Citation: Suggested Citation