Scandinavian Working Papers in Economics
CERE Working Papers,
CERE - the Center for Environmental and Resource Economics
No 2017:10: Assessing the Rebound Effect in Energy Intensive Industries: A Factor Demand Model Approach with Asymmetric Price Response
Anna Dahlqvist (), Tommy Lundgren () and Per-Olov Marklund ()
Additional contact information
Anna Dahlqvist: The National institute of Economic Research (NIER), Postal: The National institute of Economic Research (NIER), 103 62 Stockholm, Sweden
Tommy Lundgren: CERE and the Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Per-Olov Marklund: The National institute of Economic Research (NIER), Postal: The National institute of Economic Research (NIER), 103 62 Stockholm, Sweden
Abstract: The purpose of this paper is to analyze the direct rebound effect potentially prevailing in energy intense industries. The rebound effect represents economic mechanisms that will offset energy savings from energy efficiency improvements. For this purpose, a factor demand model is applied incorporating an asymmetric energy price response. Asymmetric prices imply that firms respond more strongly to energy price increases than to energy price decreases. In the empirical model we use a firm level, unbalanced panel covering the years 2001 to 2012 and four major Swedish energy-intensive industries; pulp and paper, iron and steel, chemical, and mining. The result indicates that the rebound effect is considerable in these industries. To mitigate this effect, the results suggest that policies stimulating an increase in energy efficiency should be combined with a raise in energy taxes.
Keywords: Asymmetric price response; Energy efficiency; Factor demand model; Ownprice elasticities; Voluntary Energy Efficiency Programs; Rebound effect
36 pages, December 8, 2017
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