Rebound effect of improved energy efficiency for different energy types: a general equilibrium analysis for China

CAMA Working Paper 38/2016
Author name: 
Yingying Lu
Yu Liu
Meifang Zhou

This paper explores the rebound effect of different energy types in China based on a static computable general equilibrium model. A one-off 5% energy efficiency improvement of using five different types of energy is imposed, respectively, in all the 135 production sectors in China. The rebound effect is measured both on the production level and on the economy-wide level by each type of energy. The results show that improving energy efficiency of using electricity has the largest positive impact on GDP among the five energy types. Inter-fuel substitutability does not affect the macroeconomic results significantly, but long-run impact is usually greater than the short-run impact. For those exports-oriented sectors, the capital-intensive sectors get big negative shock in the short run while the labor-intensive sectors get hurt in the long run. There is no “backfire” effect; however, improving efficiency of using electricity can cause negative rebound, which implies that improving the energy efficiency of using electricity might be a good policy choice under China’s current energy structure. In general, macro-level rebound is larger than production-level rebound. Primary energy goods show larger rebound effect than secondary energy goods. In addition, the paper points out that the policy makers in China should look at the rebound effect in the long term rather in the short term. The energy efficiency policy would still be a good and effective policy choice for energy conservation in China who has small inter-fuel substitution in that higher inter-fuel substitution may lead to larger rebound effect.

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