Squaring the energy efficiency circle: evaluating industry energy efficiency policy in a hybrid model setting

Andersen, Kristoffer Steen and Dockweiler, Steffen and Klinge Jacobsen, Henrik (2019): Squaring the energy efficiency circle: evaluating industry energy efficiency policy in a hybrid model setting.

Abstract

Improving energy efficiency within the industry will play a central role in mitigating greenhouse gas emissions by reducing the use of fossil fuels. Nevertheless, the ex-ante evaluation of energy-efficiency policies largely remains an unresolved challenge. Understood within a theoretical economic framework, the root of the challenge is the simultaneity and interaction between three primary effects: an activity, a price, and a technical effect. This paper demonstrates how the IntERACT model, a Danish hybrid model, captures each effect and their interactions endogenously. The paper finds that a specific energy efficiency policy leads to an additional reduction in industrial energy use of around 5% in the year 2030, of which a policy-induced reduction in the energy efficiency gap accounts for half. The results reflect a total rebound effect of 12.5% and an implied elasticity of energy service demand of 16 around 15% across industrial sectors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy systems analysis; sectoral energy efficiency modelling; energy efficiency policies; energy savings
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O52 - Europe; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q38 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy

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