A computable general equilibrium analysis of the relative price sensitivity required to induce rebound effects in response to an improvement in energy efficiency in the UK economy

摘要

In recent years there has been extensive debate in the energy economics and policyudliterature on the likely impacts of improvements in energy efficiency. This debate has focussed on the notion of rebound effects. Rebound effects occur when improvementsudin energy efficiency actually stimulate the direct and indirect demand for energy inudproduction and/or consumption. This phenomenon occurs through the impact of theudincreased efficiency on the effective, or implicit, price of energy. If demand isudstimulated in this way, the anticipated reduction in energy use, and the consequentudenvironmental benefits, will be partially or possibly even more than wholly (in the caseudof ‘backfire’ effects) offset. A recent report published by the UK House of Lordsudidentifies rebound effects as a plausible explanation as to why recent improvements inudenergy efficiency in the UK have not translated to reductions in energy demand at the macroeconomic level, but calls for empirical investigation of the factors that govern theudextent of such effects.udUndoubtedly the single most important conclusion of recent analysis in the UK, led by the UK Energy Research Centre (UKERC) is that the extent of rebound and backfireudeffects is always and everywhere an empirical issue. It is simply not possible touddetermine the degree of rebound and backfire from theoretical considerations alone,udnotwithstanding the claims of some contributors to the debate. In particular, theoretical analysis cannot rule out backfire. Nor, strictly, can theoretical considerations alone rule out the other limiting case, of zero rebound, that a narrow engineering approach would imply.udIn this paper we use a computable general equilibrium (CGE) framework to investigateudthe conditions under which rebound effects may occur in the Scottish regional and UKudnational economies. Previous work has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero. Here, we carry out a systematic sensitivity analysis, where we gradually introduce relative priceudsensitivity into the system, focusing in particular on elasticities of substitution inudproduction and trade parameters, in order to determine conditions under which reboundudeffects become a likely outcome. We find that, while there is positive pressure forudrebound effects even where (direct and indirect) demand for energy is very priceudinelastic, this may be partially or wholly offset by negative income and disinvestmentudeffects, which also occur in response to falling energy prices.