The macroeconomic rebound effect in China

The rebound effect measures the fraction of an energy efficiency improvement that is offset by increased energy consumption. A rebound effect can arise at both the microeconomic level and the macroeconomic level. The macroeconomic rebound effect measures the effect of an increase in energy efficiency on overall energy demand after markets adjust and re-equilibrate. At the macroeconomic level, energy efficiency gains can increase energy consumption through two channels: the macroeconomic price effect and the macroeconomic growth effect. In this paper, we econometrically estimate the macroeconomic energy rebound effect in China. Our results show that there is a statistically significant macroeconomic price rebound effect for China, for each province, and for the short run, intermediate run, and the long run. We also find some evidence of a macroeconomic growth rebound in the short run and the intermediate run for some years either nation-wide or for some provinces in China; moreover, for some years and some provinces, we cannot reject backfire. The rebound effect is an important phenomenon that the government of China should not neglect when making energy policy, as it affects how improvements in energy efficiency translate into changes in energy consumption.