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Energy substitution, technical change and rebound effects

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  • Steve Sorrell

    () (Centre for Innovation and Energy Demand and Sussex Energy Group, SPRU, University of Sussex, UK)

Abstract

This paper investigates the relationships between energy efficiency improvements by producers, the ease of substitution between energy and other inputs and the size of the resulting “rebound effects”. Fundamentally, easier substitution leads to larger rebounds. Focusing upon conceptual and methodological issues, the paper highlights the challenges of estimating and modeling rebound effects with the help of production and cost functions and questions the robustness of the evidence base in this area. It argues that the multiple definitions of “elasticities of substitution” are a source of confusion, the most commonly estimated elasticity is of little practical value, the empirical literature is contradictory, prone to bias and difficult to use and there are only tenuous links between this literature and the assumptions used within energy-economic models. While “energy-augmenting technical change” provides the natural choice of independent variable for an estimate of rebound effects, most empirical studies do not estimate this form of technical change, many modelling studies do not simulate it and others simulate it in such a way as to underestimate rebound effects. As a result, the paper argues that current econometric and modelling studies do not provide reliable guidance on the magnitude of rebound effects in different industrial sectors.

Suggested Citation

  • Steve Sorrell, 2014. "Energy substitution, technical change and rebound effects," SPRU Working Paper Series 2014-16, SPRU - Science and Technology Policy Research, University of Sussex.
  • Handle: RePEc:sru:ssewps:2014-16
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    File URL: http://www.sussex.ac.uk/spru/documents/2014-16-energy-substitution-technical-change-rebound-effects-sorrell.pdf
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    References listed on IDEAS

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    Cited by:

    1. Lin, Boqiang & Li, Jianglong, 2014. "The rebound effect for heavy industry: Empirical evidence from China," Energy Policy, Elsevier, vol. 74(C), pages 589-599.
    2. Wu, Kuei-Yen & Wu, Jung-Hua & Huang, Yun-Hsun & Fu, Szu-Chi & Chen, Chia-Yon, 2016. "Estimating direct and indirect rebound effects by supply-driven input-output model: A case study of Taiwan's industry," Energy, Elsevier, vol. 115(P1), pages 904-913.
    3. Zachlod-Jelec, Magdalena & Boratynski, Jakub, 2016. "How large and uncertain are costs of 2030 GHG emissions reduction target for the European countries? Sensitivity analysis in a global CGE model," MF Working Papers 26, Ministry of Finance in Poland.
    4. Timothy J. Garrett, 2016. "Long-run evolution of the global economy - Part 2: Hindcasts of innovation and growth," Papers 1601.00233, arXiv.org.
    5. Yang, Lisha & Li, Jianglong, 2017. "Rebound effect in China: Evidence from the power generation sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 53-62.
    6. repec:eee:appene:v:221:y:2018:i:c:p:280-298 is not listed on IDEAS
    7. Amigues, Jean-Pierre & Moreaux, Michel, 2016. "Pollution Abatement v.s. Energy Efficiency Improvements," TSE Working Papers 16-626, Toulouse School of Economics (TSE).
    8. Matthew K. Heun & João Santos & Paul E. Brockway & Randall Pruim & Tiago Domingos & Marco Sakai, 2017. "From Theory to Econometrics to Energy Policy: Cautionary Tales for Policymaking Using Aggregate Production Functions," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-44, February.
    9. Jean-Pierre Amigues & Michel Moreaux, 2016. "From Primary Resources to Useful Energy: The Pollution Ceiling Efficiency Paradox," Working Papers 2016.10, FAERE - French Association of Environmental and Resource Economists.
    10. 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.
    11. Paul E. Brockway & Harry Saunders & Matthew K. Heun & Timothy J. Foxon & Julia K. Steinberger & John R. Barrett & Steve Sorrell, 2017. "Energy Rebound as a Potential Threat to a Low-Carbon Future: Findings from a New Exergy-Based National-Level Rebound Approach," Energies, MDPI, Open Access Journal, vol. 10(1), pages 1-24, January.
    12. Paul E. Brockway & Matthew K. Heun & João Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-23, February.
    13. repec:eee:energy:v:148:y:2018:i:c:p:896-903 is not listed on IDEAS
    14. Broberg, Thomas & Berg, Charlotte & Samakovlis, Eva, 2015. "The economy-wide rebound effect from improved energy efficiency in Swedish industries–A general equilibrium analysis," Energy Policy, Elsevier, vol. 83(C), pages 26-37.
    15. Magdalena Zachlod-Jelec & Jakub Boratyński, 2016. "How large and uncertain are costs of 2030 emission reduction target for the European countries? Sensitivity analysis in a global CGE model," EcoMod2016 9449, EcoMod.
    16. Li, Jianglong & Lin, Boqiang, 2016. "Inter-factor/inter-fuel substitution, carbon intensity, and energy-related CO2 reduction: Empirical evidence from China," Energy Economics, Elsevier, vol. 56(C), pages 483-494.
    17. Christopher A. Scott & Zachary P. Sugg, 2015. "Global Energy Development and Climate-Induced Water Scarcity—Physical Limits, Sectoral Constraints, and Policy Imperatives," Energies, MDPI, Open Access Journal, vol. 8(8), pages 1-15, August.

    More about this item

    Keywords

    rebound effects; elasticities of substitution; energy augmenting technical change;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

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