Energy Efficiency in General Equilibrium with Input-Output Linkages

75 Pages Posted: 14 Jan 2020

See all articles by Christopher J. Blackburn

Christopher J. Blackburn

Government of the United States of America - Bureau of Economic Analysis (BEA)

Juan Moreno-Cruz

University of Waterloo - School of Environment, Enterprise and Development

Date Written: 2019

Abstract

Industrial activity periodically experiences breakthrough innovations in energy efficiency, but the estimated impacts of these innovations on aggregate energy use are highly varied. We develop a general equilibrium model to investigate whether this variation is determined by the structure of the economy's input-output network. Our results show sector-specific energy efficiency improvements affect aggregate energy use through adjustments in factor markets and commodity markets, and a process of structural transformation that alters the way energy is used and produced in the economy. We link the aggregate impact of these processes with new network centrality concepts that account for the capacity of a sector to transmit and respond to efficiency innovations. In a calibrated simulation, we find variation in these centrality concepts explains between 38 and 92 percent of variation in the aggregate impacts of energy efficiency, which suggests input-output structure is a critical determinant of the aggregate effects of energy efficiency.

Keywords: energy efficiency, production network, input-output, rebound effect

JEL Classification: C670, D580, L230, O330, Q430, Q580

Suggested Citation

Blackburn, Christopher J. and Moreno-Cruz, Juan, Energy Efficiency in General Equilibrium with Input-Output Linkages (2019). CESifo Working Paper No. 8007. Available at SSRN: https://ssrn.com/abstract=3518953

Christopher J. Blackburn (Contact Author)

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

Juan Moreno-Cruz

University of Waterloo - School of Environment, Enterprise and Development ( email )

Waterloo, Ontario N2L 3G1
Canada

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