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Negative rebound and disinvestment effects in response to an improvement in energy efficiency in the UK economy

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  • Turner, Karen

Abstract

This paper uses a computable general equilibrium (CGE) framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the UK national economy. Previous work for the UK has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero. The research reported in this paper involves carrying out a systematic sensitivity analysis, where relative price sensitivity is gradually introduced into the system, focusing specifically on elasticities of substitution in production and trade parameters, in order to determine conditions under which rebound effects become a likely outcome. The main result is that, while there is positive pressure for rebound effects even where (direct and indirect) demands for energy are very price inelastic, this may be partially or wholly offset by negative income, competitiveness and disinvestment effects, which also occur in response to falling energy prices. The occurrence of disinvestment effects is of particular interest. These occur where falling energy prices reduce profitability in domestic energy supply sectors, leading to a contraction in capital stock in these sectors, which may in turn lead to rebound effects that are smaller in the long run than in the short run, a result that runs contrary to the predictions of previous theoretical work in this area.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 5 (September)
Pages: 648-666

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Handle: RePEc:eee:eneeco:v:31:y:2009:i:5:p:648-666

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: General equilibrium Energy efficiency Rebound effects Disinvestment;

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References

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Citations

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Cited by:
  1. Turner, Karen & Hanley, Nick & De Fence, Janine, 2009. "Do Productivity Improvements Move Us Along the Environmental Kuznets Curve?," SIRE Discussion Papers 2009-24, Scottish Institute for Research in Economics (SIRE).
  2. Ana-Isabel Guerra & Ferran Sancho, 2010. "Rethinking Economy-Wide Rebound Measures: An Unbiased Proposal," UFAE and IAE Working Papers 814.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 05 Apr 2010.
  3. Grant Allan & Peter McGregor & Kim Swales & Karen Turner, 2009. "The Rebound Effect with Energy Production: A Partial Equilibrium Analysis," Working Papers 0925, University of Strathclyde Business School, Department of Economics.
  4. Anson, Sam & Turner, Karen, 2009. "Rebound and disinvestment effects in refined oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector," Energy Policy, Elsevier, vol. 37(9), pages 3608-3620, September.
  5. Costantini, Valeria & Martini, Chiara, 2010. "The causality between energy consumption and economic growth: A multi-sectoral analysis using non-stationary cointegrated panel data," Energy Economics, Elsevier, vol. 32(3), pages 591-603, May.
  6. Wei, Taoyuan, 2010. "A general equilibrium view of global rebound effects," Energy Economics, Elsevier, vol. 32(3), pages 661-672, May.
  7. Hanley, Nicholas & Turner, Karen, 2010. "Energy Efficiency, Rebound Effects and the Environmental Kuznets Curve," Stirling Economics Discussion Papers 2010-17, University of Stirling, Division of Economics.
  8. Ana-Isabel Guerra & Ferran Sancho, 2010. "Rethinking Economy-Wide Rebound Measures: An Unbiased Proposal," Working Papers 456, Barcelona Graduate School of Economics.
  9. Hull, David & Ó Gallachóir, Brian P. & Walker, Neil, 2009. "Development of a modelling framework in response to new European energy-efficiency regulatory obligations: The Irish experience," Energy Policy, Elsevier, vol. 37(12), pages 5363-5375, December.

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