IDEAS home Printed from https://ideas.repec.org/p/bge/wpaper/1561.html

The Carbon Rebound Challenge: Evaluating the Mitigation Effect of Fossil Fuel Subsidy Removal in Chinese Households

Author

Listed:
  • Pansong Jiang
  • Donglan Zha
  • Qian Chen
  • Jaume Freire González

Abstract

The carbon rebound effect, a phenomenon that usually accompanies improvements in energy efficiency, is frequently observed in households. To mitigate the household carbon rebound effect, the removal of fossil fuel subsidies has emerged as a potential strategy. This paper aims to systematically simulate the consequences of removing such a subsidy to inform evidence-based policy-making. We develop an analytical framework that facilitates a detailed investigation of changes in the prices of various goods and services consumed by residents after the removal of fossil fuel subsidies, as well as the main sources of household carbon rebound effect (CRE). Moreover, we examine the extent to which the removal of fossil fuel subsidies can counteract the rebound effect. Our findings indicate that rebound-driven fossil fuel consumption is the primary contributor to the total CRE. Meanwhile, consumption in the 'residence' category is the dominant source of the indirect CRE. We further show that removing all fossil fuel subsidies could totally offset the CRE in Chinese households. A notable urban-rural heterogeneity is observed. The subsidy removal for oil and natural gas yields the strongest mitigation effect on CRE in urban regions, whereas removing the oil subsidy proves most effective in rural areas. These results affirm the effectiveness of policies to remove fossil fuel subsidies. We conclude that reforming fossil fuel subsidies is a powerful tool to counteract the CRE, offering valuable insights not only for China but also for other developing countries with similar household consumption patterns.

Suggested Citation

  • Pansong Jiang & Donglan Zha & Qian Chen & Jaume Freire González, 2026. "The Carbon Rebound Challenge: Evaluating the Mitigation Effect of Fossil Fuel Subsidy Removal in Chinese Households," Working Papers 1561, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1561
    as

    Download full text from publisher

    File URL: https://bw.bse.eu/wp-content/uploads/1561.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas, Brinda A. & Azevedo, Inês L., 2013. "Estimating direct and indirect rebound effects for U.S. households with input–output analysis Part 1: Theoretical framework," Ecological Economics, Elsevier, vol. 86(C), pages 199-210.
    2. Font Vivanco, David & Kemp, René & van der Voet, Ester, 2016. "How to deal with the rebound effect? A policy-oriented approach," Energy Policy, Elsevier, vol. 94(C), pages 114-125.
    3. Freire-González, Jaume, 2017. "Evidence of direct and indirect rebound effect in households in EU-27 countries," Energy Policy, Elsevier, vol. 102(C), pages 270-276.
    4. Mundaca, Gabriela, 2017. "How much can CO2 emissions be reduced if fossil fuel subsidies are removed?," Energy Economics, Elsevier, vol. 64(C), pages 91-104.
    5. Freire-González, Jaume, 2011. "Methods to empirically estimate direct and indirect rebound effect of energy-saving technological changes in households," Ecological Modelling, Elsevier, vol. 223(1), pages 32-40.
    6. Chen, Qian & Zha, Donglan & Wang, Lijun & Yang, Guanglei, 2022. "The direct CO2 rebound effect in households: Evidence from China's provinces," Renewable and Sustainable Energy Reviews, Elsevier, vol. 155(C).
    7. Freire-González, Jaume & Font Vivanco, David & Puig-Ventosa, Ignasi, 2017. "Economic structure and energy savings from energy efficiency in households," Ecological Economics, Elsevier, vol. 131(C), pages 12-20.
    8. Lin, Boqiang & Jiang, Zhujun, 2011. "Estimates of energy subsidies in China and impact of energy subsidy reform," Energy Economics, Elsevier, vol. 33(2), pages 273-283, March.
    9. Michael Jakob & Claudine Chen & Sabine Fuss & Annika Marxen & Ottmar Edenhofer, 2015. "Development incentives for fossil fuel subsidy reform," Nature Climate Change, Nature, vol. 5(8), pages 709-712, August.
    10. Wei, Kai & Zhang, Zuopeng Justin & Lin, Boqiang, 2024. "Does news propaganda really affect residents’ electricity rebound effect: New evidence of non-price information," Energy, Elsevier, vol. 300(C).
    11. Sorrell, Steve & Dimitropoulos, John, 2008. "The rebound effect: Microeconomic definitions, limitations and extensions," Ecological Economics, Elsevier, vol. 65(3), pages 636-649, April.
    12. Wang, Lijun & Zha, Donglan & O’Mahony, Tadhg & Zhou, Dequn, 2023. "Energy efficiency lags and welfare boons: Understanding the rebound and welfare effects through China's urban households," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).
    13. Freire-González, Jaume & Ho, Mun S., 2022. "Policy strategies to tackle rebound effects: A comparative analysis," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 193.
    14. Burke, Paul J. & Liao, Hua, 2015. "Is the price elasticity of demand for coal in China increasing?," China Economic Review, Elsevier, vol. 36(C), pages 309-322.
    15. Chen, Qian & Zha, Donglan & Salman, Muhammad, 2022. "The influence of carbon tax on CO2 rebound effect and welfare in Chinese households," Energy Policy, Elsevier, vol. 168(C).
    16. Lin, Boqiang & Kuang, Yunming, 2020. "Household heterogeneity impact of removing energy subsidies in China: Direct and indirect effect," Energy Policy, Elsevier, vol. 147(C).
    17. Edgar G. Hertwich, 2005. "Consumption and the Rebound Effect: An Industrial Ecology Perspective," Journal of Industrial Ecology, Yale University, vol. 9(1‐2), pages 85-98, January.
    18. Mr. Simon Black & Antung A. Liu & Ian W.H. Parry & Nate Vernon-Lin, 2023. "IMF Fossil Fuel Subsidies Data: 2023 Update," IMF Working Papers 2023/169, International Monetary Fund.
    19. Freire-González, Jaume, 2021. "Governing Jevons’ Paradox: Policies and systemic alternatives to avoid the rebound effect," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 72.
    20. Li, Ke & Jiang, Zhujun, 2016. "The impacts of removing energy subsidies on economy-wide rebound effects in China: An input-output analysis," Energy Policy, Elsevier, vol. 98(C), pages 62-72.
    21. Dimitropoulos, John, 2007. "Energy productivity improvements and the rebound effect: An overview of the state of knowledge," Energy Policy, Elsevier, vol. 35(12), pages 6354-6363, December.
    22. Ahmann, Lara & Banning, Maximilian & Lutz, Christian, 2022. "Modeling rebound effects and counteracting policies for German industries," Ecological Economics, Elsevier, vol. 197(C).
    23. Chitnis, Mona & Sorrell, Steve, 2015. "Living up to expectations: Estimating direct and indirect rebound effects for UK households," Energy Economics, Elsevier, vol. 52(S1), pages 100-116.
    24. Safarzadeh, Soroush & Rasti-Barzoki, Morteza & Hejazi, Seyed Reza, 2020. "A review of optimal energy policy instruments on industrial energy efficiency programs, rebound effects, and government policies," Energy Policy, Elsevier, vol. 139(C).
    25. Jakob Skovgaard & Harro van Asselt, 2019. "The politics of fossil fuel subsidies and their reform: Implications for climate change mitigation," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 10(4), July.
    26. Zha, Donglan & Chen, Qian & Wang, Lijun, 2022. "Exploring carbon rebound effects in Chinese households’ consumption: A simulation analysis based on a multi-regional input–output framework," Applied Energy, Elsevier, vol. 313(C).
    27. Du, Kerui & Liu, Xueyue & Zhao, Cheng, 2023. "Environmental regulation mitigates energy rebound effect," Energy Economics, Elsevier, vol. 125(C).
    28. Li, Ke & Lin, Boqiang, 2015. "Heterogeneity in rebound effects: Estimated results and impact of China’s fossil-fuel subsidies," Applied Energy, Elsevier, vol. 149(C), pages 148-160.
    29. Sorrell, Steve & Dimitropoulos, John & Sommerville, Matt, 2009. "Empirical estimates of the direct rebound effect: A review," Energy Policy, Elsevier, vol. 37(4), pages 1356-1371, April.
    30. Jiang, Zhujun & Tan, Jijun, 2013. "How the removal of energy subsidy affects general price in China: A study based on input–output model," Energy Policy, Elsevier, vol. 63(C), pages 599-606.
    31. Du, Qiang & Han, Xiao & Li, Yi & Li, Zhe & Xia, Bo & Guo, Xiqian, 2021. "The energy rebound effect of residential buildings: Evidence from urban and rural areas in China," Energy Policy, Elsevier, vol. 153(C).
    32. A. Greening, Lorna & Greene, David L. & Difiglio, Carmen, 2000. "Energy efficiency and consumption -- the rebound effect -- a survey," Energy Policy, Elsevier, vol. 28(6-7), pages 389-401, June.
    33. Ouyang, Jinlong & Long, Enshen & Hokao, Kazunori, 2010. "Rebound effect in Chinese household energy efficiency and solution for mitigating it," Energy, Elsevier, vol. 35(12), pages 5269-5276.
    34. Wen, Fenghua & Ye, Zhengke & Yang, Huaidong & Li, Ke, 2018. "Exploring the rebound effect from the perspective of household: An analysis of China's provincial level," Energy Economics, Elsevier, vol. 75(C), pages 345-356.
    35. Thomas, Brinda A. & Azevedo, Inês L., 2013. "Estimating direct and indirect rebound effects for U.S. households with input–output analysis. Part 2: Simulation," Ecological Economics, Elsevier, vol. 86(C), pages 188-198.
    36. Morgan, Brett & MacNeil, Robert, 2025. "Ending international fossil fuel finance: Lessons from the Clean Energy Transition Partnership," Energy Policy, Elsevier, vol. 204(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wen, Fenghua & Ye, Zhengke & Yang, Huaidong & Li, Ke, 2018. "Exploring the rebound effect from the perspective of household: An analysis of China's provincial level," Energy Economics, Elsevier, vol. 75(C), pages 345-356.
    2. Freire-González, Jaume, 2017. "Evidence of direct and indirect rebound effect in households in EU-27 countries," Energy Policy, Elsevier, vol. 102(C), pages 270-276.
    3. Jin, Taeyoung & Kim, Jinsoo, 2019. "A new approach for assessing the macroeconomic growth energy rebound effect," Applied Energy, Elsevier, vol. 239(C), pages 192-200.
    4. Li, Ke & Jiang, Zhujun, 2016. "The impacts of removing energy subsidies on economy-wide rebound effects in China: An input-output analysis," Energy Policy, Elsevier, vol. 98(C), pages 62-72.
    5. Li, Ke & Lin, Boqiang, 2015. "Heterogeneity in rebound effects: Estimated results and impact of China’s fossil-fuel subsidies," Applied Energy, Elsevier, vol. 149(C), pages 148-160.
    6. Ouyang, Xiaoling & Yang, Yuchuan & Du, Kerui & Cheng, Zhenyu, 2022. "How does residential electricity consumption respond to electricity efficiency improvement? Evidence from 287 prefecture-level cities in China," Energy Policy, Elsevier, vol. 171(C).
    7. Lin, Boqiang & Zhu, Penghu, 2021. "Measurement of the direct rebound effect of residential electricity consumption: An empirical study based on the China family panel studies," Applied Energy, Elsevier, vol. 301(C).
    8. Li, Jianglong & Li, Aijun & Xie, Xuan, 2018. "Rebound effect of transportation considering additional capital costs and input-output relationships: The role of subsistence consumption and unmet demand," Energy Economics, Elsevier, vol. 74(C), pages 441-455.
    9. Kong, Li & Mu, Xianzhong & Hu, Guangwen & Tu, Chuang, 2023. "Will energy efficiency improvements reduce energy consumption? Perspective of rebound effect and evidence from beijing," Energy, Elsevier, vol. 263(PA).
    10. Zhang, Yue-Jun & Liu, Zhao & Qin, Chang-Xiong & Tan, Tai-De, 2017. "The direct and indirect CO2 rebound effect for private cars in China," Energy Policy, Elsevier, vol. 100(C), pages 149-161.
    11. Chen, Qian & Zha, Donglan & Wang, Lijun & Yang, Guanglei, 2022. "The direct CO2 rebound effect in households: Evidence from China's provinces," Renewable and Sustainable Energy Reviews, Elsevier, vol. 155(C).
    12. 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.
    13. Zha, Donglan & Chen, Qian & Wang, Lijun, 2022. "Exploring carbon rebound effects in Chinese households’ consumption: A simulation analysis based on a multi-regional input–output framework," Applied Energy, Elsevier, vol. 313(C).
    14. Lecca, Patrizio & McGregor, Peter G. & Swales, J. Kim & Turner, Karen, 2014. "The added value from a general equilibrium analysis of increased efficiency in household energy use," Ecological Economics, Elsevier, vol. 100(C), pages 51-62.
    15. Taoyuan Wei & Xue Wang, 2020. "Rebound Effect from Income Savings Due to an Energy Efficiency Improvement by Households: An Input–Output Approach," Energies, MDPI, vol. 13(16), pages 1-10, August.
    16. Liu, Jingru & Sun, Xin & Lu, Bin & Zhang, Yunkun & Sun, Rui, 2016. "The life cycle rebound effect of air-conditioner consumption in China," Applied Energy, Elsevier, vol. 184(C), pages 1026-1032.
    17. Du, Qiang & Han, Xiao & Li, Yi & Li, Zhe & Xia, Bo & Guo, Xiqian, 2021. "The energy rebound effect of residential buildings: Evidence from urban and rural areas in China," Energy Policy, Elsevier, vol. 153(C).
    18. Liu, Hongxun & Du, Kerui & Li, Jianglong, 2019. "An improved approach to estimate direct rebound effect by incorporating energy efficiency: A revisit of China's industrial energy demand," Energy Economics, Elsevier, vol. 80(C), pages 720-730.
    19. Toroghi, Shahaboddin H. & Oliver, Matthew E., 2019. "Framework for estimation of the direct rebound effect for residential photovoltaic systems," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    20. Freire-González, Jaume & Font Vivanco, David & Puig-Ventosa, Ignasi, 2017. "Economic structure and energy savings from energy efficiency in households," Ecological Economics, Elsevier, vol. 131(C), pages 12-20.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:1561. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bruno Guallar (email available below). General contact details of provider: https://edirc.repec.org/data/bargses.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.