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Unraveling the Interplay of Substitution Elasticities and the Green Energy Rebound Effect

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  • Verónica Acurio Vásconez
  • Mónica Pereira Henriques

Abstract

This paper explores the nuanced interplay between the green energy rebound effect and the elasticity of substitution within a Solow growth model. Our study characterizes how the rebound effect varies with the elasticity of substitution between production factors. Our findings demonstrate that technological progress in green or fossil energy leads to different consumption patterns depending on the elasticity of substitution. For substitution elasticities below one, technological advances result in slower increases in energy consumption relative to labor growth, while for elasticities above one, energy consumption accelerates. These insights underscore the critical role of substitution elasticities in shaping effective energy policies, highlighting opportunities to mitigate the rebound effect and promote sustainable energy transitions.

Suggested Citation

  • Verónica Acurio Vásconez & Mónica Pereira Henriques, 2025. "Unraveling the Interplay of Substitution Elasticities and the Green Energy Rebound Effect," Working Papers of BETA 2025-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2025-12
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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