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The economy-wide rebound effect and U.S. business cycles: A time-varying exercise

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  • Marcio Santetti

Abstract

Energy efficiency gains in production and consumption are undisputed economic and environmental goals. However, potential energy savings derived from efficiency innovations may have short-lasting effects due to increased demand for more affordable energy services. Measuring the size of this rebound effect is a critical tool for better assessing the reliability of energy-saving technological change for global warming mitigation. This paper estimates the size of the economy-wide rebound effect using time-varying Vector Autoregressive (VAR) models with stochastic volatility for U.S. business-cycle peak and trough periods. All models estimate a rebound effect close to 100%, with reductions in energy use lasting no longer than three years following energy efficiency innovations. The latter, therefore, are an insufficient tool for effectively changing historical energy use patterns.

Suggested Citation

  • Marcio Santetti, 2025. "The economy-wide rebound effect and U.S. business cycles: A time-varying exercise," Papers 2512.20765, arXiv.org.
    • Handle: RePEc:arx:papers:2512.20765
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