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How large is the economy-wide rebound effect in middle income countries? Evidence from Iran

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  • Mahboubeh Jafari

    (Department of Economics, Shiraz University, Shiraz, Iran)

  • David I. Stern

    (Crawford School of Public Policy, Australian National University)

  • Stephan B. Bruns

    (Centre for Environmental Sciences, University of Hasselt, Belgium and Department of Economics, University of Göttingen, Germany)

Abstract

The issue of whether energy efficiency improvements will lower energy use or not is contentious. We estimate the economy-wide rebound effect for Iran using a structural vector autoregressive model estimated with quarterly data from 1988:3 to 2018:1. The structural shocks are identified by independent component analysis, a statistical identification technique that does not require us to impose restrictions based on economic theory on the model. The results show that in response to an energy efficiency shock energy use falls initially, but returns to near its original level over time. The economy-wide rebound effect in Iran is 84% after 6 years and its confidence interval includes 100% implying that policies that encourage energy efficiency innovation will have limited longterm impact on energy use.

Suggested Citation

  • Mahboubeh Jafari & David I. Stern & Stephan B. Bruns, 2021. "How large is the economy-wide rebound effect in middle income countries? Evidence from Iran," CCEP Working Papers 2107, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:ccepwp:2107
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