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The energy efficiency rebound effect in general equilibrium

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  • Böhringer, Christoph
  • Rivers, Nicholas

Abstract

We develop a stylized general equilibrium model to estimate changes in economy-wide energy consumption following an exogenous costless improvement in energy efficiency. We use the model to calculate the rebound effect, which determines how behavioral changes offset energy efficiency improvements. We use the framework to decompose the rebound effect into partial and general equilibrium components. In our theoretical analysis, we identify key drivers of the general equilibrium rebound effect, including a composition channel, an energy price channel, a growth channel, and a labor supply channel. Based on numerical simulations with a parameterized version of the model, we show that both general and partial equilibrium components of the rebound effect can be substantial. We thus caution against hopes to resolve adverse impacts of fossil fuel use such as climate change via energy efficiency improvements from costless technological advances.

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  • Böhringer, Christoph & Rivers, Nicholas, 2021. "The energy efficiency rebound effect in general equilibrium," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:jeeman:v:109:y:2021:i:c:s0095069621000772
    DOI: 10.1016/j.jeem.2021.102508
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    7. Brockway, Paul E. & Sorrell, Steve & Semieniuk, Gregor & Heun, Matthew Kuperus & Court, Victor, 2021. "Energy efficiency and economy-wide rebound effects: A review of the evidence and its implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 141(C).
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    More about this item

    Keywords

    Energy efficiency; Climate change; Rebound effect; General equilibrium;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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