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Energy taxation policies can counteract the rebound effect: analysis within a general equilibrium framework

Energy Efficiency volume 13, pages 69–78 (2020)Cite this article

Abstract

The rebound effect reflects the difference between the expected energy savings from energy efficiency, and the real ones, considering the former is higher than the latter. In some extreme cases, some scholars consider energy use can even increase after an energy efficiency improvement. This is due to agents’ behavioural responses. After almost four decades of theoretical and empirical studies in the field, there is a strong consensus amongst energy economists that the rebound effect of energy efficiency exists, although its importance is still being discussed. However, there are few empirical studies exploring its potential solutions. In this research, we empirically assess the effects of energy taxation on the rebound effect. Using a dynamic energy-economy computable general equilibrium (CGE) model of the Spanish economy, we test a global energy efficiency increase of 5.00%, and at the same time, different ad valorem tax rates on energy industries. We find that a tax rate of 3.76% would totally counteract the economy-wide rebound effect of 82.82% we estimate for the Spanish economy. This tax rate would still allow some economic benefits provided by the increase of energy productivity.

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Funding

This project received funding from the European Union’s Horizon 2020 Research and Innovation Program under the Marie Sklodowska-Curie grant agreement, No. 654189. It also received the support of the Beatriu de Pinós postdoctoral programme of the Government of Catalonia’s Secretariat for Universities and Research of the Ministry of Economy and Knowledge.

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  1. ENT Foundation, Josep Llanza, 1-7, 2 3, 08800, Vilanova i la Geltrú, Barcelona, Spain

    Jaume Freire-González

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  1. Jaume Freire-González
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Correspondence to Jaume Freire-González.

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Freire-González, J. Energy taxation policies can counteract the rebound effect: analysis within a general equilibrium framework. Energy Efficiency 13, 69–78 (2020). https://doi.org/10.1007/s12053-019-09830-x

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  • DOI: https://doi.org/10.1007/s12053-019-09830-x

Keywords

  • Energy efficiency
  • Rebound effect
  • Energy taxation
  • Computable general equilibrium