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Economy-wide Estimates of Rebound Effects: Evidence from Panel Data

Adetutu, Morakinyo and Glass, Anthony and Weyman-Jones, Thomas (2015): Economy-wide Estimates of Rebound Effects: Evidence from Panel Data.

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Abstract

Energy consumption and greenhouse emissions across many countries have increased overtime despite widespread energy efficiency improvements. One explanation offered in the literature is the rebound effect (RE), however there is a debate about the magnitude and appropriate model for estimating RE. Using a combined stochastic frontier analysis and two-stage dynamic panel data approach for 55 countries covering 1980-2010, we explore these two issues of magnitude and model. Our central estimates indicate that, in the short-run, 100% energy efficiency improvement is followed by 90% rebound in energy consumption, but in the long-run it leads to a 36% decrease in energy consumption. Overall, our estimated cross-country RE magnitudes indicate the need to consider or account for RE when energy forecasts and policy measures are derived from potential energy efficiency savings.

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