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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

    (National Institute of Economic Research)

  • Lundgren, Tommy

    (Centre for Environmental and Resource Economics, Umeå University and Swedish University of Agricultural Science)

  • Marklund, Per-Olov

    (National Institute of Economic Research)

Abstract

The purpose of this paper is to analyze the direct rebound effect poten-tially prevailing in energy intense industries. The rebound effect repre-sents 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 sug-gest 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," Working Papers 150, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0150
    as

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    References listed on IDEAS

    as
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    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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