The Rebound Effect and its Representation in Energy and Climate Models

FCN Working Paper No. 16/2018

51 Pages Posted: 20 Jan 2019 Last revised: 29 Jan 2020

See all articles by Gloria Colmenares Montero

Gloria Colmenares Montero

University of Münster

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics

Reinhard Madlener

RWTH Aachen University

Date Written: December 1, 2018

Abstract

In this paper, we review the state-of-the-art and common practice of energy and climate modeling vis-a-vis the rebound literature. In particular, we study how energy system and economy wide models include and quantify rebound effects - the gap between actual and expected saving or the behavioral adjustment in response to an energy efficiency improvement, in terms of energy or greenhouse gas emissions. First, we explain the interaction between drivers of energy efficiency improvements, energy-efficiency policies and the rebound effect to provide a framework for a general theoretical revision along the aggregation level (from micro- to macro-economic levels). Using this classification, we analyze rebound effect representations in empirical models by four dimensions: actors (industry or the production side, and private households or the consumption side), the aggregation level, income level (developed or developing countries), and time (short and long-run). Furthermore, we focus on rebound effects in models of costless energy efficiency improvement that hold other attributes constant (zerocost breakthrough), and energy-efficiency policies that may be bundled with other product attributes that affect energy use (policy-induced efficiency improvement) [Gillingham et al., 2016]. We find that a clear representation of one or simultaneous drivers of energy efficiency improvements is crucial to target the goals of energy savings, greenhouse gas mitigation, and welfare gains. Under this broader view, the rebound effect is one additional phenomenon to take into consideration. This perspective provokes and provides additional policy implications. Reporting rebound effects as a stand-alone percentage is not sufficiently informative for policy considerations and the distinction of the aggregation level is important to asses the scalability of energy efficiency policies. Finally, we give some ideas and motivations for future research.

Keywords: Rebound effect, Macroeconomic models, Energy efficiency, Energy policy

JEL Classification: E13, Q410, Q430, Q48, Q540, R13

Suggested Citation

Colmenares Montero, Gloria and Löschel, Andreas and Madlener, Reinhard, The Rebound Effect and its Representation in Energy and Climate Models (December 1, 2018). FCN Working Paper No. 16/2018. Available at SSRN: https://ssrn.com/abstract=3314180 or http://dx.doi.org/10.2139/ssrn.3314180

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/eroe

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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