Rebound effect of improved energy efficiency for different energy types: A general equilibrium analysis for China

This paper explores the rebound effect of different energy types in China based on a static computable general equilibrium model. A one-off 5% energy efficiency improvement is imposed on five different types of energy, respectively, in all the 135 production sectors in China. The rebound effect is measured both on the production level and on the economy-wide level for each type of energy. The results show that improving energy efficiency of using electricity has the largest positive impact on GDP among the five energy types. Inter-fuel substitutability does not affect the macroeconomic results significantly, but long-run impact is usually greater than the short-run impact. For the exports-oriented sectors, those that are capital-intensive get big negative shock in the short run while those that are labour-intensive get hurt in the long run. There is no “backfire” effect; however, improving efficiency of using electricity can cause negative rebound, which implies that improving the energy efficiency of using electricity might be a good policy choice under China's current energy structure. In general, macro-level rebound is larger than production-level rebound. Primary energy goods show larger rebound effect than secondary energy goods. In addition, the paper points out that the policy makers in China should look at the rebound effect in the long term rather than in the short term. The energy efficiency policy would be a good and effective policy choice for energy conservation in China when it still has small inter-fuel substitution.     

The economy-wide rebound effect from improved energy efficiency in Swedish industries–A general equilibrium analysis

The objective of this paper is to analyse the rebound effect from increased efficiency in industrial energy use in Sweden. Energy efficiency improvements can have significant micro- and macroeconomic effects that hamper the positive effect on real energy savings. To assess the size of the overall rebound effect in the Swedish economy, we apply a computable general equilibrium model. The results show that the economy-wide rebound effect depends on a number of factors, e.g. the extent of the energy efficiency improvement, how the labour market is modelled as well as whether the increase in energy efficiency is combined with a cost or not. We find that the rebound effect following a five per cent increase in energy efficiency in the Swedish industry lies in the 40–70 per cent range. When energy efficiency is only improved in energy-intensive production, the rebound effect becomes even higher. These findings are in line with the results in the literature.     

Rebound and disinvestment effects in refined oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector

In this paper, we use an energy–economy–environment computable general equilibrium (CGE) model of the Scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial Transport sector on the supply and use of energy. We focus our analysis on Scottish refined oil, as the main type of energy input used in commercial transport activity. We find that a 5% increase in energy efficiency in the commercial Transport sector leads to rebound effects in the use of oil-based energy commodities in all time periods, in the target sector and at the economy-wide level. However, our results also suggest that such an efficiency improvement may cause a contraction in capacity in the Scottish refined oil supply sector. This ‘disinvestment effect’ acts as a constraint on the size of rebound effects. However, the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector, particularly the substitutability of energy for non-energy intermediate inputs to production.     

Sharing mitigation burden among sectors in China: Results from CEEPA

Based on the China Energy and Environmental Policy Analysis model which takes into account the current characters and potential reforms of energy markets in China, and from the perspective of economy-wide cost-effectiveness, this study aims to analyze how carbon mitigation burdens should be shared among key emission sectors in China, as well as how these sectors would behave to meet their burdens. This study finds that in general, allocating mitigation burdens based on historical emissions could realize the national target in a cost-effective way. However, some adjustments should be made to the coal, electricity, and transportation sectors. The mitigation targets for all sectors, especially for the coal sector, should not be set too high in the short-term. And the burden shared by the electricity sector should increase if electricity pricing is deregulated; meanwhile, energy efficiency and the energy input structure should be improved in the electricity sector.     

International spillover and rebound effects from increased energy efficiency in Germany

The pollution/energy leakage literature raises the concern that policies implemented in one country, such as a carbon tax or tight energy restrictions, might simply result in the reallocation of energy use to other countries. This paper addresses these concerns in the context of policies to increase energy efficiency, rather than direct action to reduce energy use. Using a global CGE simulation model, we extend the analyses of ‘economy-wide’ rebound from the national focus of previous studies to incorporate international spill-over effects from trade in goods and services. Our focus is to investigate whether these effects have the potential to increase or reduce the overall (global) rebound of local energy efficiency improvements. In the case we consider, increased energy efficiency in German production generates changes in comparative advantage that produce negative leakage effects, thereby actually rendering global rebound less than national rebound.     

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.     

The effect of energy end-use efficiency improvement on China’s energy use and CO2 emissions: a CGE model-based analysis

With its rapid economic growth, China is now confronted with soaring pressure from both its energy supply and the environment. To deal with this conflict, energy end-use efficiency improvement is now promoted by the government as an emphasis for future energy saving. This study explores the general equilibrium effect of energy end-use efficiency improvement on China’s economy, energy use, and CO₂ emissions. This paper develops a static, multisector computable general equilibrium model (CGE) for China, with specific detail in energy use and with the embodiment of energy efficiency. In order to explore the ability of subsidizing non-fossil-generated electricity on moderating potential rebound effects, in this model, the electricity sector was deconstructed into five specific generation activities using bottom–up data from the Chinese electricity industry. The model is calibrated into a 16-sector Chinese Social Accounting Matrix for the year 2002. In the analysis, seven scenarios were established: business as usual, solely efficiency improvement, and five policy scenarios (taxing carbon, subsidized hydropower, subsidized nuclear power, combination of taxing carbon and subsidized hydropower, combination of taxing carbon and subsidized nuclear power). Results show that a sectoral-uniform improvement of energy end-use efficiency will increase rather than decrease the total energy consumption and CO₂ emissions. The sensitivity analysis of sectoral efficiency improvement shows that efficiency improvements happened in different sectors may have obvious different extents of rebound. The three sectors, whose efficient improvements do not drive-up total national energy use and CO₂ emissions, include Iron and Steel, Building Materials, and Construction. Thus, the improvement of energy end-use efficiency should be sectoral specific. When differentiating the sectoral energy-saving goal, not only the saving potential of each sector but also its potential to ease the total rebound should be taken into account. Moreover, since the potential efficiency improvement for a sector over a certain period will be limited, technology measures should work along with a specific policy to neutralize the rebound effect. Results of policy analysis show that one relatively enhanced way is to combine carbon taxing with subsidized hydropower.     

The macroeconomic rebound effect and the world economy

This paper examines the macroeconomic rebound effect for the global economy arising from energy-efficiency policies. Such policies are expected to be a leading component of climate policy portfolios being proposed and adopted in order to achieve climate stabilisation targets for 2020, 2030 and 2050, such as the G8 50% reduction target by 2050. We apply the global “New Economics” or Post Keynesian model E3MG, developing the version reported in IPCC AR4 WG3. The rebound effect refers to the idea that some or all of the expected reductions in energy consumption as a result of energy-efficiency improvements are offset by an increasing demand for energy services, arising from reductions in the effective price of energy services resulting from those improvements. As policies to stimulate energy-efficiency improvements are a key part of climate-change policies, the likely magnitude of any rebound effect is of great importance to assessing the effectiveness of those policies. The literature distinguishes three types of rebound effect from energy-efficiency improvements: direct, indirect and economy-wide. The macroeconomic rebound effect, which is the focus of this paper, is the combination of the indirect and economy-wide effects. Estimates of the effects of no-regrets efficiency policies are reported by the International Energy Agency in World Energy Outlook, 2006, and synthesised in the IPCC AR4 WG3 report. We analyse policies for the transport, residential and services buildings and industrial sectors of the economy for the post-2012 period, 2013–2030. The estimated direct rebound effect, implicit in the IEA WEO/IPCC AR4 estimates, is treated as exogenous, based on estimates from the literature, globally about 10%. The total rebound effect, however, is 31% by 2020 rising to 52% by 2030. The total effect includes the direct effect and the effects of (1) the lower cost of energy on energy demand in the three broad sectors as well as of (2) the extra consumers’ expenditure from higher (implicit) real income and (3) the extra energy-efficiency investments. The rebound effects build up over time as the economic system adapts to the higher real incomes from the energy savings and the investments.     

The macro-economic rebound effect and the UK economy

This paper examines the macroeconomic rebound effect for the UK economy arising from energy efficiency policies 2000–2010 using the macroeconomic model, MDM-E3. The literature distinguishes between three types of rebound effect: direct, indirect and economy-wide. The macroeconomic rebound effect considered here is the combination of the indirect and economy-wide effects. Policies for the domestic, business, commercial and public, and transport sectors of the economy are analysed for 2000–2010. Overall, the policies lead to a saving of about 8% of the energy, which would otherwise have been used and a reduction in CO₂ emissions of 10% (or 14 mtC) by 2010. There are also favourable macroeconomic effects: lower inflation and higher growth. We find that the macroeconomic rebound effect arising from UK energy efficiency policies for the period 2000–2010 is around 11% by 2010, averaged across sectors of the economy. When this is added to the (assumed) direct rebound effect of around 15%, this gives a total rebound effect of around 26% arising from these policies. Thus, the findings of the study support the argument that energy efficiency improvements for both consumers and producers, stimulated by policy incentives, will lead to significant reductions in energy demand and hence in greenhouse gas emissions.     

Quantifying the rebound effects of energy efficiency improvements and energy conserving behaviour in Sweden

Doubts have recurrently been raised on the extent to which energy efficiency can reduce the demand for energy. Improvements in efficiency may cause so-called rebound effects by reducing the prices of energy services as well as by increasing the budget for consumption of other goods and services. The magnitude of such effects is crucial to whether energy efficiency should be a strategy for environmental policy or not. This paper aims to derive a general expression of the rebound effects of household consumption in a parameterised form where available data can be tested. The paper analyses how different parameter assumptions affect the quantification of rebound effects and what may be reasonable ranges. Income effects are quantified using data from the Swedish Household Budget Survey of different goods and services split on income classes. The changes in consumption patterns with increasing income are used to establish the composition of marginal consumption. Combined with energy intensities derived from input–output analysis, this gives a model of how money saved on energy use in one sector may lead to increased energy use in other sectors. The total rebound effects of energy efficiency improvements appear to be in the range 5–15% in most cases, but these results are fairly sensitive to assumptions of energy service price elasticities. Cases with low or negative capital costs for energy efficiency improvements may also result in much higher rebound effects as the income effects become more important. Energy-conserving behaviour (reduced energy service demand) affecting direct energy use such as heating and transport gives rise to rebound effects in the order of 10–20%, depending on the household expenditure per primary energy for different fuels and energy carriers.     

Energy efficiency and economic growth: A retrospective CGE analysis for Canada from 2002 to 2012

The efficiency with which energy is used by firms and households has widespread impacts on economic activity, which in turn has implications for environmental quality and energy security. Using a novel method that could be used for other jurisdictions, we estimate the impact of energy efficiency improvements on Canadian GDP, employment, economic structure, and welfare from 2002 to 2012. We use a counterfactual back-casting method with a sectorally and regionally disaggregated dynamic recursive computable general equilibrium model, in effect “reverse calibrating” the model from observed data to isolate the effects of energy efficiency. We estimate that total energy efficiency improvements in Canada during this period increased GDP by 2.0% (0.19%/yr), employment by 2.5% (0.24%/yr) and household welfare by about 1.5% (0.15%/yr). Additionally, energy efficiency improvements reoriented economic structure from capital intense energy supply sectors to relatively labour intense manufacturing and services. We find evidence of widespread “rebound” on an energy expenditure basis across most sectors, and “backfire” (where energy efficiency leads to absolute energy use increases) in oil sands in situ extraction, bitumen upgrading, shale gas extraction, lime production, pulp & paper, and metal smelting, but overall energy use is reduced by energy efficiency improvements over this period.     

The impacts of removing energy subsidies on economy-wide rebound effects in China: An input-output analysis

Facing with the increasing contradiction of economic growth, energy scarcity and environmental deterioration, energy conservation and emissions abatement have been ambitious targets for the Chinese government. Improving energy efficiency through technological advancement is a primary measure to achieve these targets. However, the existence of energy rebound effects may completely or partially offset energy savings associated with technological advancement. This paper adopted a modified input-output model to estimate the economy-wide energy rebound effects across China's economic sectors with the consideration of energy subsidies. The empirical results show that the aggregate rebound effect of China is about 1.9% in 2007–2010, thus technological advancement significantly restrains energy consumption increasing. Removing energy subsidies will cause the aggregate rebound effect declines to 1.53%. Specifically, removing subsidies for coal and nature gas can reduce the rebound effects signifcantly, while removing the subsidies for oil products has a small impact on rebound effect. The existence of rebound effects implies that technological advancement should be cooperated with energy price reform so as to achieve the energy saving target. In addition, the government should consider the diversity of economic sectors and energy types when design the reform schedule.     

Measuring energy rebound effect in the Chinese economy: An economic accounting approach

Estimating the magnitude of China's economy-wide rebound effect has attracted much attention in recent years. Most existing studies measure the rebound effect through the additional energy consumption from technological progress. However, in general technological progress is not equivalent to energy efficiency improvement. Consequently, their estimation may be misleading. To overcome the limitation, this paper develops an alternative approach for estimating energy rebound effect. Based on the proposed approach, China's economy-wide energy rebound effect is revisited. The empirical result shows that during the period 1981–2011 the rebound effects in China are between 30% and 40%, with an average value of 34.3%.     

Dutch sectoral energy intensity developments in international perspective, 1987–2005

This paper makes use of a new dataset to investigate energy intensity developments in the Netherlands over the period 1987–2005. The dataset allows for a comparison with 18 other OECD countries. A key feature of our analysis is that we combine a cross-country perspective with a high level of sectoral detail, covering 49 sectors. Particularly innovative is our evaluation of energy intensity developments in a wide range of Service sectors. We find that across sectors, energy intensity levels in the Netherlands on average decreased only marginally, and increased in Services. This performance is in general worse than the OECD average, especially between 1987 and 1995. Changes in the sectoral composition of the economy play an important role in explaining aggregate trends. In the Manufacturing sector, about half of the efficiency improvements were undone by a shift towards a more energy-intensive industry structure. In contrast, in the Service sector efficiency decreased, which was undone for about one third by a shift towards a less energy-intensive sector structure.     

Rethinking economy-wide rebound measures: An unbiased proposal

In spite of having been first introduced in the last half of the ninetieth century, the debate about the possible rebound effects from energy efficiency improvements is still an open question in the economic literature. This paper contributes to the existing research on this issue proposing an unbiased measure for economy-wide rebound effects. The novelty of this economy-wide rebound measure stems from the fact that not only actual energy savings but also potential energy savings are quantified under general equilibrium conditions. Our findings indicate that the use of engineering savings instead of general equilibrium potential savings downward biases economy-wide rebound effects and upward-biases backfire effects. The discrepancies between the traditional indicator and our proposed measure are analysed in the context of the Spanish economy.     

Calculating economy-wide energy intensity decline rate: The role of sectoral output and energy shares

We specify formulas for computing the rate of decline in economy-wide energy intensity by aggregating its two determinants—technical efficiency improvements in the various sectors of the economy, and shifts in economic activity among these sectors. The formulas incorporate the interdependence between sectoral shares, and establish a one-to-one relation between sectoral output and energy shares. This helps to eliminate future energy intensity decline scenarios which involve implausible values of either sectoral share. An illustrative application of the formulas is provided, using within-sector efficiency improvement estimates suggested by Lightfoot–Green and Harvey.     

Role of energy efficiency standards in reducing CO2 emissions in Germany: An assessment with TIMES

Energy efficiency is widely viewed as an important element of energy and environmental policy. Applying the TIMES model, this paper examines the impacts of additional efficiency improvement measures (as prescribed by the ACROPOLIS project) over the baseline, at the level of individual sectors level as well as in a combined implementation, on the German energy system in terms of energy savings, technological development, emissions and costs. Implementing efficiency measures in all sectors together, CO₂ reduction is possible through substitution of conventional gas or oil boilers by condensing gas boilers especially in single family houses, shifting from petrol to diesel vehicles in private transport, increased use of electric vehicles, gas combined cycle power plants and CHP (combined heat and power production) etc. At a sectoral level, the residential sector offers double benefits of CO₂ reduction and cost savings. In the transport sector, on the other hand, CO₂ reduction is the most expensive, using bio-fuels and methanol to achieve the efficiency targets.     

Modelling the UK residential energy sector under long-term decarbonisation scenarios: Comparison between energy systems and sectoral modelling approaches

The UK government has set a groundbreaking target of a 60% reduction in carbon dioxide (CO₂) emissions by 2050. Scenario and modelling assessment of this stringent target consistently finds that all sectors need to contribute to emissions reductions. The UK residential sector accounts for around 30% of the total final energy use and more than one-quarter of CO₂ emissions. This paper focuses on modelling of the residential sector in a system wide energy–economy models (UK MARKAL) and key UK sectoral housing stock models. The UK residential energy demand and CO₂ emission from the both approaches are compared. In an energy system with 60% economy-wide CO₂ reductions, the residential sector plays a commensurate role. Energy systems analysis finds this reduction is primarily driven by energy systems interactions notably decarbonisation of the power sector combined with increased appliance efficiency. The stock models find alternate decarbonisation pathways based on assumptions related to the future building stock and behavioural changes. The paper concludes with a discussion on the assumptions and drivers of emission reductions in different models of the residential energy sector.     

Introducing technology learning for energy technologies in a national CGE model through soft links to global and national energy models

This paper describes a method to model the influence by global policy scenarios, particularly spillover of technology learning, on the energy service demand of the non-energy sectors of the national economy. It is exemplified by Norway. Spillover is obtained from the technology-rich global Energy Technology Perspective model operated by the International Energy Agency. It is provided to a national hybrid model where a national bottom-up Markal model carries forward spillover into a national top-down CGE¹ model at a disaggregated demand category level. Spillover of technology learning from the global energy technology market will reduce national generation costs of energy carriers. This may in turn increase demand in the non-energy sectors of the economy because of the rebound effect. The influence of spillover on the Norwegian economy is most pronounced for the production level of industrial chemicals and for the demand for electricity for residential energy services. The influence is modest, however, because all existing electricity generating capacity is hydroelectric and thus compatible with the low emission policy scenario. In countries where most of the existing generating capacity must be replaced by nascent energy technologies or carbon captured and storage the influence on demand is expected to be more significant.