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The Rebound Effect in Energy-Intensive Industries: A Factor Demand Model with Asymmetric Price Response

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  • Anna Dahlqvist, Tommy Lundgren, and Per-Olov Marklund

Abstract

The purpose of this paper is to estimate industry-specific direct rebound effects and to relate these effects to industry energy efficiency programs. The rebound effect represents economic behavior that will offset energy savings from energy efficiency improvements. The paper focuses on four energy intense sectors in Sweden; pulp and paper, iron and steel, chemical, and mining, during 2001'2012. We apply a factor demand model that allows for asymmetric energy price responses, i.e. that firms respond differently to increasing and decreasing energy prices. The results show considerable rebound effects. For electricity and non-fossil fuels, efficiency improvements could even 'backfire'. To mitigate this effect, policies, such as voluntary energy efficiency programs, should be combined with an increase in energy taxes if the ambition is to reduce overall energy use.

Suggested Citation

  • Anna Dahlqvist, Tommy Lundgren, and Per-Olov Marklund, 2021. "The Rebound Effect in Energy-Intensive Industries: A Factor Demand Model with Asymmetric Price Response," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 177-204.
    • Handle: RePEc:aen:journl:ej42-3-lundgren
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    Cited by:

    1. Du, Kerui & Liu, Xueyue & Zhao, Cheng, 2023. "Environmental regulation mitigates energy rebound effect," Energy Economics, Elsevier, vol. 125(C).
    2. Berner, Anne & Lange, Steffen & Silbersdorff, Alexander, 2022. "Firm-level energy rebound effects and relative efficiency in the German manufacturing sector," Energy Economics, Elsevier, vol. 109(C).
    3. Agnes Horvath & Adrienn Takacsne Papp & L szl Molnar & Katalin Liptak & Zoltan Musinszki & Klara Szucsne Markovics, 2023. "Climate and Energy Issues of Energy-Intensive Sectors," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 25(64), pages 813-813, August.
    4. Ahmann, Lara & Banning, Maximilian & Lutz, Christian, 2022. "Modeling rebound effects and counteracting policies for German industries," Ecological Economics, Elsevier, vol. 197(C).

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    JEL classification:

    • F0 - International Economics - - General

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