Reform of refined oil product pricing mechanism and energy rebound effect for passenger transportation in China

Improving energy efficiency is the primary method adopted by the Chinese government in an effort to achieve energy conservation target in the transport sector. However, the offsetting effect of energy rebound would greatly reduce its real energy-saving potentials. We set up a Linear Approximation of the Almost Ideal Demand System Model (LA-AIDS model) to estimate the rebound effect for passenger transportation in China. Real energy conservation effect of improving energy efficiency can also be obtained in the process. The result shows that the rebound effect is approximately 107.2%. This figure signifies the existence of ‘backfire effect’, indicating that efficiency improvement in practice does not always lead to energy-saving. We conclude that one important factor leading to the rebound effect, is the refined oil pricing mechanism. China's refined oil pricing mechanism has been subjected to criticism in recent years. The results of simulation analysis show that the rebound could be reduced to approximately 90.7% if the refined oil pricing mechanism is reformed. In this regard, we suggest further reforms in the current refined oil pricing mechanism.     

Direct rebound effect for urban household in China—an empirical study

Household sector has become one important target sector on which the Chinese government implements its energy-saving and emission reduction policies. Improving energy efficiency is the primary method adopted by the Chinese government for energy conservation. However, its real energy-saving effects would be affected greatly owing to energy rebound effects. In this paper, we set up a Linear Approximation of the Almost Ideal Demand System (LA/AIDS) model to estimate the direct rebound effect for urban households in China, and real energy conservation effect of improving energy efficiency is also obtained. The assessment of the rebound has a lot of uncertainty, and therefore, exact figures are hard to determine. The results show that energy rebound for Chinese urban household is approximately 66%. In this regard, the Chinese government could not accomplish the energy conservation target through improving energy efficiency only. Policy supplements like energy pricing reform are also needed.     

Energy efficiency achievements in China׳s industrial and transport sectors: How do they rate?

China is experiencing intensified industrialisation and motorisation. In the world׳s largest emerging economy, energy efficiency is expected to play a critical role in the ever-rising demand for energy. Based on factual overviews and numerical analysis, this article carries out an in-depth investigation into the effectiveness of policies announced or implemented in recent decades targeted at energy conservation in the energy intensive manufacturing and transportation sectors. It highlights nine energy intensive sectors that achieved major improvements in their energy technology efficiency efforts. Under the umbrella of the 11th Five-Year Plan, these sectors׳ performances reflect the effectiveness of China׳s energy conservation governance. Numerous actions have been taken in China to reduce the road transport sector׳s demand for energy and its GHG emissions by implementing fuel economy standards, promoting advanced energy efficient vehicles, and alternative fuels.Coal-based energy saving technologies, especially industrial furnace technologies, are critical for China׳s near and medium-term energy saving. In the long run, renewable energy development and expanding the railway transport system are the most effective ways to reduce energy use and GHG emissions in China. Fuel economy standards could reduce oil consumption and GHGs by 34–35 per cent.     

The regional Dutch disease effect within China: A spatial econometric investigation

As one of the primary causes of the resource curse effect, the “Dutch disease” effect (DDE) at the national level has been widely explored by previous studies. However, a special investigation on the existence and mechanism of the regional DDE within China, the largest developing country in the world, is still absent. Using the panel data of 30 provincial-level regions in China over 1994–2016, this paper for the first time employs the spatial Durbin model to examine the existence and two mechanisms (i.e., the resource movement effect (RME) and the spending effect (SE)) of the regional DDE within China. In particular, to highlight the spatial effect of the DDE and to obtain robust results, we use two kinds of spatial weight matrices in the spatial Durbin model: a traditional symmetric geographical distance weight matrix and a novel asymmetric mixed geography-economy weight matrix. The results show that natural resource sector boom has a negative effect on the development of both local and neighboring manufacturing sectors within China, suggesting that the regional DDE exists at China's provincial level. We also find that the DDE is mainly caused by the energy sector boom and is not evident in both metallic and non-metallic mineral sectors. Additionally, eastern China, central China, and western China all show the symptom of the DDE. Both eastern China and central China show a significantly negative direct effect and an insignificant indirect effect of resource sector boom, while both the direct and indirect effects of resource sector boom are evident in western China. Moreover, the RME and the SE are all responsible for the appearance of the regional DDE within China. On the one hand, resource sector boom induces labor and capital mobility from manufacturing to mining in both local and neighboring regions. On the other hand, resource sector boom raises inflation level in both local and neighboring regions. Finally, based on these findings, we provide some policy recommendations for relieving and avoiding the regional DDE.     

Empirical evidence of direct rebound effect in Indian two-wheeler sector

The transport sector is the main contributor to the greenhouse gas emissions in India. The rise in atmospheric pollution due to greenhouse gases has triggered the energy efficiency improvement policy in the Indian automotive sector. The extent of success of the energy efficiency improvement policy in any sector is substantially influenced by the phenomenon of “rebound effect”. The present study is aimed at seeking for the existence of direct rebound effect and its stability over time in two-wheeler transport sector in India using aggregate time series data. The study found out the presence of this effect in the two-wheeler sector, and it experiences a partial rebound of 25.5%. The direct rebound effect was found to be declining over time which is in line with the Greene (Energy Policy, 41, 14–28, 2012) and Small and Van Dender ( Energy Journal, 28(1), 25–51, 2007) models. The rebound effect existence in the two-wheeler sector should be considered during the development and implementation of energy efficiency related policies in the Indian transport sector in order to reap the maximum benefits out of these policies in the future.     

Regional energy rebound effect: The impact of economy-wide and sector level energy efficiency improvement in Georgia,USA

Rebound effect is defined as the lost part of ceteris paribus energy savings from improvements on energy efficiency. In this paper, we investigate economy-wide energy rebound effects by developing a computable general equilibrium (CGE) model for Georgia, USA. The model adopts a highly disaggregated sector profile and highlights the substitution possibilities between different energy sources in the production structure. These two features allow us to better characterize the change in energy use in face of an efficiency shock, and to explore in detail how a sector-level shock propagates throughout the economic structure to generate aggregate impacts. We find that with economy-wide energy efficiency improvement on the production side, economy-wide rebound is moderate. Energy price levels fall very slightly, yet sectors respond to these changing prices quite differently in terms of local production and demand. Energy efficiency improvements in particular sectors (epicenters) induce quite different economy-wide impacts. In general, we expect large rebound if the epicenter sector is an energy production sector, a direct upstream/downstream sector of energy production sectors, a transportation sector or a sector with high production elasticity. Our analysis offers valuable insights for policy makers aiming to achieve energy conservation through increasing energy efficiency.     

Estimation on oil demand and oil saving potential of China's road transport sector

China is currently in the stage of industrialization and urbanization, which is characterized by rigid energy demand and rapid growth of energy consumption. Therefore, energy conservation will become a major strategy for China in a transition to low-carbon economy. China's transport industry is of high energy consumption. In 2010, oil consumption in transport industry takes up 38.2% of the country's total oil demand, of which 23.6% is taken up by road transport sector. As a result, oil saving in China's road transport sector is vital to the whole nation. The co-integration method is developed to find a long-run relationship between oil consumption and affecting factors such as GDP, road condition, labor productivity and oil price, to estimate oil demand and to predict future oil saving potential in China's transport sector under different oil-saving scenarios. Monte Carlo simulation is further used for risk analysis. Results show that under BAU condition, oil demand of China's road transport sector will reach 278.5 million ton of oil equivalents (MTOE) in 2020. Oil saving potential will be 86 MTOE and 131 MTOE under moderate oil-saving scenario and advanced oil-saving scenario, respectively. This paper provides a reference to establishing oil saving policy for China's road transport sector.     

Assessment of long-term sustainable end-use energy demand in Romania*

Romania is the 10th largest economy in EU-28 and also one of the fastest growing economies in the region. An end-use energy demand model is developed for Romania to assess energy requirement by sector and by end-use for 2015–2050 period. Industry would surpass residential sector as the largest final energy-consuming sector from 2035 onwards. Services sector would exhibit the fastest growth of energy consumption. Despite expected decline in country’s population, demand for electricity would grow in the future driven by increased household income and expanded services sector, which is relatively electricity intensive. Still, Romania’s per capita electricity consumption would be about half of the EU-28 average. At the end-use level, thermal processes in industry, space heating in the residential and services, and road passenger travel in transport sector would be dominant throughout the study period. Improvement of energy efficiency in the heating system exhibits the highest potential of energy saving.     

交通运输业能耗现状及未来走势分析

低碳经济要求交通运输有效、合理地使用能源,优化配置各种交通工具,降低能耗。近年来,我国交通运输业能耗增长率总体上高于全社会能耗增长率,占全社会能耗比重基本维持在7.5%左右。各种运输方式的能耗主要集中在油耗上,2007年交通运输业汽煤柴3种油耗叠加在一起,占全社会油耗比重近70%。交通运输中电能利用效率较高,节电效果好于全社会,电耗占全社会电耗比重从2002年的2.07%降至2007年的1.63%,但占全国交通运输能耗比重仅10%左右,能耗结构不合理现象并未得到改善。2008年国家铁路单位运输工作量综合能耗比上年降低3.1%,2009年我国铁路电气化率达到41.9%,铁路能耗结构出现根本性改善和优化,开始转变为以电耗为主。公路运输油耗总量呈快速增长趋势,百吨公里油耗指标呈稳中略升态势,节能空间和潜能较大。水运(含港口)能耗2004年之前呈上升趋势,之后下降趋势明显,约占交通运输业总能耗的15%。民航每吨公里油耗从2002年的0.364kg降至2007年的0.309kg,航油消耗增长率基本维持在12%上下,有较为明显的减弱趋势。未来10年,我国交通运输能源消耗总量将进一步攀升,虽然能耗结构将得到一定程度优化,电耗比重会迅速增长,但由于公路能耗在交通运输能耗中占有绝对比重,故难以从根本上改善交通运输以油耗为主的结构特点。我国交通运输业应逐步调整到以铁路为主导的各种交通方式协调发展的模式上来,最大限度地降低运输业油耗在整个交通运输行业中的比重,"以电代油"。     

An improved approach to estimate direct rebound effect by incorporating energy efficiency: A revisit of China's industrial energy demand

The rebound effect, or the response to energy efficiency improvement, has drawn considerable attention from economists and policymakers. However, the magnitude remains quite controversial because of the differences in the definitions and methods being used. Originating from the definition of direct rebound effect, we develop an improved approach incorporating energy efficiency. The main advantages of the proposed approach are twofold. First, it enables us to estimate the demand elasticity of useful energy service with respect to energy service price. The estimates are more consistent with the definition of rebound effect and are more effective. Second, it decomposes direct rebound effect into substitution and output channels, enabling us to further understand the microeconomic mechanisms. Applying this method, we assess the direct energy rebound effect in China's industrial sectors. We find that the direct rebound effect for the industry is 37.0%, and the substitution and output channels contribute to 13.1% and 23.9%, respectively. Substantial variations in the magnitudes and mechanisms occur by sector. For heavy industry, most energy rebound is induced by output expansion because of its sizeable cost decrease from efficiency improvements. Unlike heavy industry, most energy rebound in light industry comes from substituting energy service for other inputs because firms in light industry are more flexible in adjusting production inputs. Our results provide evidences for the importance of energy efficiency measures, and highlight the necessity of differentiated measures according to the sectoral characteristics.     

Estimating direct rebound effects for personal automotive travel in Great Britain

Direct rebound effects result from increased consumption of cheaper energy services. For example, more fuel-efficient cars encourage more car travel. This study is the first to quantify this effect for personal automotive travel in Great Britain. We use aggregate time series data on transport activity, fuel consumption and other relevant variables over the period 1970–2011 and estimate the direct rebound effect from the elasticity of both vehicle and passenger kilometres with respect to: a) vehicle fuel efficiency (km/MJ); b) the fuel cost of driving (£/km); and c) road fuel prices (£/MJ). We estimate a total of 108 models, paying careful attention to methodological issues and model diagnostics. Taking changes in fuel efficiency as the explanatory variable, we find little evidence of a long-run direct rebound effect in Great Britain over this period. However, taking changes in either the fuel cost of driving or fuel prices as the explanatory variable we estimate a direct rebound effect in the range 9% to 36% with a mean of ~ 19%. This estimate is consistent with the results of US studies and suggests that around one fifth of the potential fuel savings from improved car fuel efficiency may have been eroded through increased driving. We also show how the normalisation of distance travelled (per capita, per adult or per driver) affects the results obtained.     

Sustainable development of energy systems for western China

The distribution of energy and industry in China is extremely uneven. The western region is rich in energy resources but relatively economically backward, while the eastern region, particularly, the southeast coastal area, is an industrially-developed area but is short of energy resources. On the basis of such a situation, this paper recommends the sustainable development of energy systems for the western region. The specific innovative energy systems adopted here can convert the western region's fossil fuels to alternative fuels and electricity with higher efficiency, lower investment cost, and less impact upon the environment. As one of such innovative energy systems, the MES (multi-functional energy system) can achieve 10–14% in the energy conservation ratio, 4–8% reduction of investment cost, and a 10–37% decrease of main pollutants. Moreover, its adoption will increase the income and accelerate the development of the energy industry in the western region, as well as meet the energy demand of the eastern region. The analysis in this paper presents a feasible energy road map for the rapid yet sustainable development of China's western region.     

中国中长期碳减排战略目标初探(Ⅲ)——石油能源产品在交通运输等行业中的应用和碳减排

在我国中长期的终端能源需求中石油将占约15%的份额,其中55%～60%将被用于交通运输行业。逐步减少交通运输领域石油能源产品的使用量,对减少能源消费总量和二氧化碳排放量十分重要。目前国内外研究机构预测的中国2050年货运周转总量(8×104～9×104Gt.km)及公路货运周转量均明显偏高,造成预测的运输燃料消耗量太高,这也反映出调整中国经济产业结构和进出口贸易结构的紧迫性。减少私人乘用车的拥有量和出行量也是节能减排的关键,采用西方发达国家私人乘用车的比例,预测中国2050年将拥有5×108～6×108辆乘用车不符合中国人口众多、城市中心区人口密度的特点,将乘用车数量控制在3.0×108辆的水平比较恰当。目前全球运输领域二氧化碳排放量约占总排放量的20%～25%,中国运输领域的二氧化碳排放量将逐步上升,占总排放量的份额将从目前的7%提高到2050年的30%以上。应努力采取各种措施,使2050年乘用车的二氧化碳排放强度降低到40g/km的水平。除了减少化石能源石油产品使用量、使用生物质燃料、推广纯电动汽车和开发燃料电池汽车外,改变出行方式、发展方便快捷的公共交通显得十分重要。预计我国2050年燃料电池汽车将占到小汽车保有量的20%左右,纯电动汽车占30%左右,各种混合动力汽车将占50%左右。为了使中国2050年二氧化碳排放总量控制在40×108～50×108t的水平,有可能也有必要将石油的使用量控制在6.0×108t,交通运输领域石油能源产品使用量控制在4.0×108t以下。     

Climate policies for road transport revisited (I): Evaluation of the current framework

The global rise of greenhouse gas (GHG) emissions and its potentially devastating consequences require a comprehensive regulatory framework for reducing emissions, including those from the transport sector. Alternative fuels and technologies have been promoted as a means for reducing the carbon intensity of the transport sector. However, the overall transport policy framework in major world economies is geared towards the use of conventional fossil fuels. This paper evaluates the effectiveness and efficiency of current climate policies for road transport that (1) target fuel producers and/or car manufacturers, and (2) influence use of alternative fuels and technologies. With diversifying fuel supply chains, carbon intensity of fuels and energy efficiency of vehicles cannot be regulated by a single instrument. We demonstrate that vehicles are best regulated across all fuels in terms of energy per distance. We conclude that price-based policies and a cap on total emissions are essential for alleviating rebound effects and perverse incentives of fuel efficiency standards and low carbon fuel standards. In tandem with existing policy tools, cap and price signal policies incentivize all emissions reduction options. Design and effects of cap and trade in the transport sector are investigated in the companion article (Flachsland et al., in this issue).     

Achieving low-carbon urban passenger transport in China: Insights from the heterogeneous rebound effect

The rapid increase in energy consumption and carbon emissions in China's passenger transportation sector threatens both the environment and the nation's energy security. Energy efficiency improvements, leading to lower fuel consumption, are therefore of considerable interest to policymakers trying to achieve low-carbon travel. However, it is well established that higher miles per gallon efficiencies can, by reducing the costs of travel, lead to some level of increased personal travel: the so-called ‘rebound effect’. This paper describes an empirical study to measure the size and also the variability in this effect at the provincial level and what this variability implies for a carbon tax policy. This rebound effect is quantified using a two-stage Almost Ideal Demand System (AIDS) model. A backfire effect (i.e. the rebound is ≫100%) is observed in urban passenger transport, with disparities in the size of the rebound effect ranging from 114% to 153% among China's provinces. The differences in economic development as well as related differences in consumers' behavior, especially in the behavior of “marginal consumers”, have contributed to this heterogeneity, with a larger carbon tax (more than 110Yuan/tonne) needed in richer provinces such as Jiangsu, Zhejiang, Guangdong and Fujian in order to bring about similar levels of carbon reductions nationwide.     

Carbon pricing and energy efficiency improvement -- why to miss the interaction for developing economies? An illustrative CGE based application to the Pakistan case

Carbon/energy taxes and energy efficiency improvement are studied well in the recent years for their potential adverse impacts on economy, especially for lost production and international competitiveness, and rebound effects. However, little attention has been paid to investigate them jointly, which can not only prevent fall of energy services cost and thereby rebound effect but reduce the associated macroeconomic costs. This study thus employs a 20 sector CGE model to explore separately the impacts of carbon tax and its coordinated implementation with energy efficiency improvement on the Pakistan economy. The country underwent enormous pressure of energy security issues as well as climate change fallouts in the last couple of years and can be regarded as a suitable candidate for energy/environmental conservation policies to be considered at a broader context with more concrete efforts. The simulation results show that the impact of carbon tax on GDP is negative but resulting reductions in pollutant emissions are relatively high. Moreover, the GDP is expected to grow comparatively positive when analyzed with improvements in energy efficiency, with even higher decline in energy consumption demand and so emissions. This simultaneous economic and environmental improvement would thus have positive implications regarding sustainable development of the country.     

Electrification of the Canadian road transportation sector: A 2050 outlook with TIMES-Canada

We use a newly developed bottom-up model of the entire Canadian energy system (TIMES-Canada) to assess potentials for electrification of the road transport sector. A special emphasis has been put on the modelling of the Canadian road transport, by considering a variety of vehicles for passenger and freight transportation. Besides a business-as-usual (baseline) scenario, we have analysed an energy policy scenario imposing targets for electric vehicle penetration and a climate policy scenario imposing targets for greenhouse gas emission reduction. Our analysis shows on the one hand that electric vehicles penetrate notably the passenger vehicle market after 2040 in the baseline scenario and after 2030 in the energy policy scenario (following the assumed penetration targets). On the other hand, the assumed climate policy forces a stronger penetration of electric vehicles for passenger transportation, with a progressive phasing out of internal combustion engine vehicles, whereas the latter vehicles remain dominant for freight transportation but with a shift away of fossil fuels and in favour of biofuels. A sensitivity analysis on the (assumed) evolution of electric vehicles over time confirms these general trends.     

Strategies for a road transport system based on renewable resources – The case of an import-independent Sweden in 2025

When discussing how society can decrease greenhouse gas emissions, the transport sector is often seen as posing one of the most difficult problems. In addition, the transport sector faces problems related to security of supply. The aim of this paper is to present possible strategies for a road transport system based on renewable energy sources and to illustrate how such a system could be designed to avoid dependency on imports, using Sweden as an example. The demand-side strategies considered include measures for decreasing the demand for transport, as well as various technical and non-technical means of improving vehicle fuel economy. On the supply side, biofuels and synthetic fuels produced from renewable electricity are discussed. Calculations are performed to ascertain the possible impact of these measures on the future Swedish road transport sector. The results underline the importance of powerful demand-side measures and show that although biofuels can certainly contribute significantly to an import-independent road transport sector, they are far from enough even in a biomass-rich country like Sweden. Instead, according to this study, fuels based on renewable electricity will have to cover more than half of the road transport sector’s energy demand.     

The rebound effect in the aviation sector

The rebound effect, i.e., the (partial) offset of the energy efficiency improvement potential due to a reduction in marginal usage costs and the associated increase in consumer demand, has been extensively studied for residential energy demand and automobile travel. This study presents a quantitative estimate of the rebound effect for an air traffic network including the 22 busiest airports, which serve 14 of the highest O–D cities within the domestic U.S. aviation sector. To satisfy this objective, passenger flows, aircraft operations, flight delays and the resulting energy use are simulated. Our model results indicate that the average rebound effect in this network is about 19%, for the range of aircraft fuel burn reductions considered. This is the net impact of an increase in air transportation supply to satisfy the rising passenger demand, airline operational effects that further increase supply, and the mitigating effects of an increase in flight delays. Although the magnitude of the rebound effect is small, it can be significant for a sector that has comparatively few options for reducing greenhouse gas emissions.     

Empirical evidence of direct rebound effect in Catalonia

This paper reviews the empirical literature concerning the direct rebound effect in households; it briefly analyzes the main theoretical and methodological aspects, and finally estimates the magnitude of direct rebound effect for all energy services using electricity in households of Catalonia (Spain) using econometric techniques. The main results show an estimated direct rebound effect of 35% in the short term and 49% in the long term. The existence of a rebound effect reduces the effectiveness of energy efficiency policies.