How Robust are Estimates of the Rebound Effect of Energy Efficiency Improvements? A Sensitivity Analysis of Consumer Heterogeneity and Elasticities

Veronika Kulmer () and Sebastian Seebauer ()
Additional contact information
Veronika Kulmer: JOANNEUM RESEARCH Forschungsgesellschaft mbH, Postal: Leonhardstraße 59, 8010 Graz, Austria, http://www.joanneum.at/
Sebastian Seebauer: JOANNEUM RESEARCH Forschungsgesellschaft mbH, Postal: Leonhardstraße 59, 8010 Graz, Austria, http://www.joanneum.at/

No 16/2017, FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)

Abstract: Economy-wide rebound effects may undermine climate policies relying on energy efficiency improvements. However, available rebound estimates diverge widely. We illustrate the crucial role of model assumptions of household heterogeneity and elasticities. A computable general equilibrium model of the Austrian economy incorporates multiple household groups with heterogeneous preferences and analyzes how improving efficiency by 10% affects household fossil fuel consumption. In the base model, economy-wide rebound is 65%; different household groups show direct rebound of 8-12%; thus, indirect rebound mainly contributes to economy-wide rebound. A sensitivity analysis using Monte Carlo simulation varies elasticities between household groups, namely substitutability between material and energy goods, and between different energy goods. In 160 simulation runs, the economy-wide rebound emerges as rather robust. By contrast, direct rebound varies widely among household groups and attains 30%, where reciprocal feedback between groups builds up. In the base model, a fossil fuel tax rate of 43% neutralizes the economy-wide rebound. When elasticities in 180 simulation runs are varied, this tax rate spans from 15% to 80%. Thus, rebound estimates and derived policy advice, such as specific rates and numbers, should be treated with great caution, unless elasticity parameters are reliable and account for heterogeneous consumer preferences.

Keywords: Economy-wide rebound; sensitivity analysis; CGE model; household heterogeneity (search for similar items in EconPapers)
JEL-codes: C68 D58 Q41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-11
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.fcn.eonerc.rwth-aachen.de/global/show_document.asp?id=aaaaaaaaaayfkwx Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:fcnwpa:2017_016

Access Statistics for this paper

More papers in FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) Contact information at EDIRC.
Bibliographic data for series maintained by Hendrik Schmitz ().