General Equilibrium Rebound from Energy Efficiency Innovation

University of Arizona Department of Economics Working Paper 14-02

59 Pages Posted: 1 Jun 2014 Last revised: 10 Sep 2019

See all articles by Derek Lemoine

Derek Lemoine

University of Arizona - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 5, 2019

Abstract

Energy efficiency improvements "rebound" when economic responses undercut their direct energy savings. I show that general equilibrium channels typically amplify rebound by making consumption goods cheaper but typically dampen rebound by increasing demand for non-energy inputs to production and by changing the size of the energy supply sector. Improvements in the efficiency of the energy supply sector generate especially large rebound because they make energy cheaper in all other sectors. Quantitatively, improving the efficiency of U.S. non-energy supply sectors by 1% would reduce U.S. energy use by 0.58%, with rebound of 28%. General equilibrium channels increase those savings by 19%; however, they reduce the savings from improving the efficiency of the energy supply sector by 65%.

Keywords: factor productivity, factor intensity, factor bias, efficiency, rebound, backfire, substitution

JEL Classification: D58, O31, O33, Q41

Suggested Citation

Lemoine, Derek, General Equilibrium Rebound from Energy Efficiency Innovation (September 5, 2019). University of Arizona Department of Economics Working Paper 14-02, Available at SSRN: https://ssrn.com/abstract=2443593 or http://dx.doi.org/10.2139/ssrn.2443593

Derek Lemoine (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.dereklemoine.com/

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