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Costs of energy efficiency mandates can reverse the sign of rebound

Author

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  • Don Fullerton
  • Chi L. Ta

Abstract

Improvements in energy efficiency can reduce costs of consuming services from cars and appliances and result in positive rebound that offsets part of the direct energy reduction. Our analytical general equilibrium model decomposes rebound into direct and indirect effects. A costless technology shock has positive rebound as in prior literature, but a pre-existing energy efficiency standard can negate direct energy savings from that shock. For increased stringency of energy efficiency standards, however, we show how income effects reduce energy use for both services and other goods. We show exactly when those increased costs imply negative total rebound.

Suggested Citation

  • Don Fullerton & Chi L. Ta, 2019. "Costs of energy efficiency mandates can reverse the sign of rebound," CESifo Working Paper Series 7550, CESifo.
  • Handle: RePEc:ces:ceswps:_7550
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    References listed on IDEAS

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      by noreply@blogger.com (David Stern) in Stochastic Trend on 2021-04-04 21:39:00

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    Cited by:

    1. Stern, David I., 2020. "How large is the economy-wide rebound effect?," Energy Policy, Elsevier, vol. 147(C).
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    3. Böhringer, Christoph & Rivers, Nicholas, 2021. "The energy efficiency rebound effect in general equilibrium," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    4. Rocha, Felipe Freitas da & Almeida, Edmar Luiz Fagundes de, 2021. "A general equilibrium model of macroeconomic rebound effect: A broader view," Energy Economics, Elsevier, vol. 98(C).
    5. Christopher J. Blackburn & Juan Moreno-Cruz, 2019. "Energy Efficiency in General Equilibrium with Input-Output Linkages," CESifo Working Paper Series 8007, CESifo.
    6. Lemoine, Derek, 2020. "General equilibrium rebound from energy efficiency innovation," European Economic Review, Elsevier, vol. 125(C).
    7. Garth Heutel & Xin Zhang, 2020. "Efficiency Wages, Unemployment, and Environmental Policy," NBER Working Papers 27960, National Bureau of Economic Research, Inc.
    8. Brockway, Paul E. & Sorrell, Steve & Semieniuk, Gregor & Heun, Matthew Kuperus & Court, Victor, 2021. "Energy efficiency and economy-wide rebound effects: A review of the evidence and its implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 141(C).

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    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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