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The Rebound Effect in Energy-Intensive Industries:A Factor Demand Model with Asymmetric Price Response

Author

Listed:
  • Anna Dahlqvist
  • Tommy Lundgren
  • Per-Olov Marklund

Abstract

The purpose of this paper is to estimate industry-specific direct rebound effects and to relate these effects to industry energy efficiency programs. The rebound effect represents economic behavior that will offset energy savings from energy efficiency improvements. The paper focuses on four energy intense sectors in Sweden; pulp and paper, iron and steel, chemical, and mining, during 2001-2012. We apply a factor demand model that allows for asymmetric energy price responses, i.e. that firms respond differently to increasing and decreasing energy prices. The results show considerable rebound effects. For electricity and non-fossil fuels, efficiency improvements could even ‘backfire’. To mitigate this effect, policies, such as voluntary energy efficiency programs, should be combined with an increase in energy taxes if the ambition is to reduce overall energy use.

Suggested Citation

  • Anna Dahlqvist & Tommy Lundgren & Per-Olov Marklund, 2021. "The Rebound Effect in Energy-Intensive Industries:A Factor Demand Model with Asymmetric Price Response," The Energy Journal, , vol. 42(3), pages 177-204, May.
    • Handle: RePEc:sae:enejou:v:42:y:2021:i:3:p:177-204
    DOI: 10.5547/01956574.42.3.adah
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    References listed on IDEAS

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    Citations

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    Cited by:

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    2. Golnaz Amjadi & Moriah Bostian & Hanna Lindström & Tommy Lundgren & Mattias Vesterberg, 2025. "The Effect of Environmental Protection Expenditures on Industrial Employment in Sweden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(4), pages 1071-1110, April.
    3. Janna Axenbeck & Thomas Niebel, 2025. "Digital Technology Adoption and Changes in Energy Intensity in German Manufacturing Firms," The Energy Journal, , vol. 46(3), pages 73-102, May.
    4. Tufan Özsoy, 2024. "The “energy rebound effect” within the framework of environmental sustainability," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 13(2), March.
    5. Gustafsson, Johan & Ma, Xiaofei & Maih, Junior & Vesterberg, Mattias, 2025. "Macroeconomic effects of fiscal policy under an energy supply shock," Energy Policy, Elsevier, vol. 203(C).
    6. Du, Kerui & Liu, Xueyue & Zhao, Cheng, 2025. "The unintended consequence of trade liberalization: Input tariff reduction and firm energy rebound effect in China," Journal of Economic Behavior & Organization, Elsevier, vol. 237(C).

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