General Equilibrium Rebound from Energy Efficiency Innovation

University of Arizona Department of Economics Working Paper 14-02

40 Pages Posted: 1 Jun 2014 Last revised: 18 Oct 2018

See all articles by Derek Lemoine

Derek Lemoine

University of Arizona - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 10, 2018

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 the cost of non-energy inputs to production. Improvements in energy efficiency are especially likely to increase total energy use when they arise in the energy supply sector because they make energy inputs cheaper in all other sectors. When energy and non-energy inputs are substitutes (complements), innovators often direct research efforts towards those consumption good sectors where improvements in efficiency are especially likely to increase (decrease) total energy use.

Keywords: factor productivity, factor intensity, factor bias, efficiency, rebound, backfire, substitution

JEL Classification: D58, O31, O33, Q41

Suggested Citation

Lemoine, Derek, General Equilibrium Rebound from Energy Efficiency Innovation (October 10, 2018). University of Arizona Department of Economics Working Paper 14-02. Available at SSRN: https://ssrn.com/abstract=2443593 or http://dx.doi.org/10.2139/ssrn.2443593

Derek Lemoine (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.dereklemoine.com/

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