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Assessing the Rebound Effect in Energy Intensive Industries: A Factor Demand Model Approach with Asymmetric Price Response

Author

Listed:
  • Dahlqvist, Anna

    (The National institute of Economic Research (NIER))

  • Lundgren, Tommy

    (CERE and the Department of Economics, Umeå University)

  • Marklund, Per-Olov

    (The National institute of Economic Research (NIER))

Abstract

The purpose of this paper is to analyze the direct rebound effect potentially prevailing in energy intense industries. The rebound effect represents economic mechanisms that will offset energy savings from energy efficiency improvements. For this purpose, a factor demand model is applied incorporating an asymmetric energy price response. Asymmetric prices imply that firms respond more strongly to energy price increases than to energy price decreases. In the empirical model we use a firm level, unbalanced panel covering the years 2001 to 2012 and four major Swedish energy-intensive industries; pulp and paper, iron and steel, chemical, and mining. The result indicates that the rebound effect is considerable in these industries. To mitigate this effect, the results suggest that policies stimulating an increase in energy efficiency should be combined with a raise in energy taxes.

Suggested Citation

  • Dahlqvist, Anna & Lundgren, Tommy & Marklund, Per-Olov, 2017. "Assessing the Rebound Effect in Energy Intensive Industries: A Factor Demand Model Approach with Asymmetric Price Response," CERE Working Papers 2017:10, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2017_010
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    File URL: http://www.cere.se/se/forskning/working-papers/881-assessing-the-rebound-effect-in-energy-intensive-industries-a-factor-demand-model-approach-with-asymmetric-price-response.html
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    More about this item

    Keywords

    Asymmetric price response; Energy efficiency; Factor demand model; Ownprice elasticities; Voluntary Energy Efficiency Programs; Rebound effect;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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