THE REBOUND EFFECT: EVIDENCE FOR CATALONIA AND INDIRECT EFFECTS THROUGH AN ENVIRONMENTAL INPUT-OUTPUT ANALYSIS

Transcription

1 THE REBOUND EFFECT: EVIDENCE FOR CATALONIA AND INDIRECT EFFECTS THROUGH AN ENVIRONMENTAL INPUT-OUTPUT ANALYSIS Jaume Freire González Venice, 17th july 2010 Sponsorized by: - Comissionat per a Universitats i Recerca del Departament d Innovació, Universitats i Empresa de la Generalitat de Catalunya -ENT, Environment and Management - EXIOPOL

2 Outline 1. Introduction 2. Types of rebound effect 3. Empirical evidence of direct rebound effect 4. Methodological issues related to direct rebound effect 5. Estimations of direct rebound effect for Catalonia (Spain) 6. The re-spending effects of energy efficiency improvements 7. Indirect rebound effect and energy Input-output analysis 8. Conclusions 1/17

3 Introduction Underlying assumption: Energy efficiency improvement policies energy emission of pollutants A factor is not taken into consideration: the rebound effect. This makes the potential energy savings produced by an energy efficiency improvement do not become (totally or partially) effective. Backfire happens when the efficiency improvement paradoxically leads to an increase of the energy. JEVONS PARADOX (Jevons, 1865)* * Jevons, W. S. (1865). The Coal Question. London: Macmillan and Co. 2/17

4 Types of rebound effect I 1. Direct rebound effect: an energy efficiency improvement of an energy service produces a reduction of the effective cost of the service, which increases its demand. 2. Indirect rebound effect: the reduction of the cost of an energy service can produce changes on the demand of other goods, services, and factors, which also require energy to be produced. 3. Economy-wide effects: the reduction of the cost of an energy service reduces the price of intermediate and final goods adjusting prices and quantities throughout the economy. These improvements may reduce energy prices that may boost economic growth and, again, increase the energy. 3/17

5 Types of rebound effect II Effective energy savings Estimated energy savings Economy-wide effects Indirect rebound effect Direct rebound effect Source: based on Sorrell, S. (2007). The rebound effect: an assessment of the evidence for economywide energy savings from improved energy efficiency. UK Energy Research Centre. October, /17

6 Empirical evidence of rebound effect I Direct rebound effect Indirect rebound effect and economywide effects 5/17

7 Empirical evidence of rebound effect II There is consensus among energy economists about the existence of rebound effect, but not about its extent. Two positions: -Rebound effect < 100% - The efficiency improvement leads to energy savings Initial energy Efficiency improvement Expected energy Rebound effect Final energy -Rebound effect > 100% backfire The efficiency improvement leads to an increase of final energy Initial energy Efficiency improvement Expected energy Rebound effect Final energy 6/17

8 Empirical evidence of rebound effect III Why is there disagreement about the extent of the rebound effect? 1. Authors use different definitions of rebound effect, with different definitions about related issues such as the relevant limits of the analyzed system. 2. Empirical evidence about the rebound effect is limited, ambiguous and inconclusive, so it is opened to a wide variety of interpretations. 3. Some fundamental assumptions about how the economy operates are in discussion. These can affect substantially the rebound effect estimations. 7/17

9 Empirical evidence of direct rebound effect Direct rebound effect estimations for end uses in USA households: End use Rebound effect Number of studies Automotive transport 10 30% 22* Space heating 10 30% 26** Space cooling 0 50% 9*** Water heating <10 40% 5*** Residential lighting 5 12% 4*** Other appliances 0% 2*** * These studies are done with a number of methods that provide good correspondence of estimates. ** These studies are done with only a moderate number of different methods that show some variability in estimates. *** These studies are done with only one or two methods and are inconclusive in results. Source: Greening, L. A., Greene, D. L. i C. Difiglio (2000). Energy efficiency and - the rebound effect - a survey. Energy Policy, 28, /17

10 Methodological issues of direct rebound effect I Some definitions of direct rebound effect are available in the literature. They are useful to make econometric estimations: Rebound effect definition Mathematical formalization 1. Mathematical definition engineering ( E) ( S) 1 2. Economic definition ( E) ( S) 1 3. First approximation through energy price ( E) ( S) 1 4. Second approximation through energy price and energy demand P S P E ( E) ( E) 1 P E Notes: is elasticity, is energy efficiency, E is the energy demand, S is the useful work demand, PS is the price of useful work, P E is the price of energy. Source: Sorrell, S. (2007). The rebound effect: an assessment of the evidence for economy wide energy savings from improved energy efficiency. UK Energy Research Centre. October, /17

11 Methodological issues of direct rebound effect II To obtain these definitions two important hypothesis are assumed: 1. Symmetry: Consumers have the same responses to energy price decreases than to energy efficiency improvements. Realistic: an energy efficiency improvement is equivalent to a reduction in the cost of energy 2. Energy efficiency is not affected by energy price changes: ( P E ( ) 0) Realistic in periods of stability or decrease in energy prices Not realistic in periods of increase in energy prices, where prices lead to energy efficiency improvements 10/17

12 Estimations for Catalonia I Variables and data used: 1. Electricity in households 2. Electricity prices 3. Gas prices 4. Climatic variables: Heating and cooling degree-days 5. Familiar income Panel data of 43 Catalan municipalities, period /17

13 Estimations for Catalonia II Econometric models estimated: ln EElec 1ln P 2ln 3ln 4ln t E RFDB t t HDDt EElec t 1 Where E Elec t is energy, is the independent term, P E t is the marginal price of domestic electricity, RFDB t is familiar income, HDD t are heating degree days and E is the energy of the previous period. Elec t 1 12/17

14 Estimations for Catalonia III Econometric models estimated for Catalonia: Rebound effect estimation for a set of energy services that use electricity in households. Fixed effects model: lnc ln P ln P lny ln HDD u it i 1 E 2 G 3 it 4 it it it it For long-term effects and to assure the cointegration of the series, it has been specified the next Error Correction Mechanism model (ECM) in diferencies: C P RFDB HDD C u it 1 it 2 it 3 it 4 it 1 it 1 it 13/17

15 Estimations for Catalonia IV Estimated direct rebound effect for a set of energy services that use electricity in households : Potential savings Real savings 10% 6.4% Short term: 36%: Initial energy Efficiency improvement Expected energy Direct rebound effect Final energy Potential savings 10% Real savings 5.1% Long term: 49%: Initial energy Efficiency improvement Expected energy Direct rebound effect Final energy 14/17

16 The re-spending effects of energy efficiency improvements Energy efficiency improvements in households Energy Input-output approach Direct rebound effect Cost of energy service Disposable income of households Indirect rebound effect Monetary savings are re-spent on other goods and services They need energy to be produced!! 15/17

17 Indirect rebound effect and energy Input-output analysis When changes in patterns by households take place, the overall energy of the economy can be estimated: 1 eh E ( I A) yh e h is the total energy of the economy caused by households E is a vector of sectorial energy intensities (I-A) -1 is the Leontief inverse matrix y h is the final demand of households reflecting the pattern of households The indirect rebound effect in households can be obtained by changing the pattern of households y( h ) through the re-spending effect in an energy Input-output model. Preliminary results shown that, with a proportional distribution of monetary savings between the rest of sectors, direct plus indirect rebound effect could be about 97.5% in households in Catalonia. 16/17

18 Conclusions 1. Direct rebound effect for energy services in households would be less than 100% (but it increase in the long term). 2. The estimations for Catalonia are consistent with estimations about the same energy services in other industrialized countries. 3. Indirect rebound effects can be addressed through an energy Input-output analysis of the changes in patterns derived from an energy efficiency improvement. 4. Preliminary results of direct plus indirect rebound effect estimations show that expected energy savings in households in Catalonia may not be happening (only a 2.5% of expected savings!!!) 5. Energy policies do not consider the rebound effect, so they may be not effective at reducing resources and pollutant emissions. 6. Environmental taxation would be a useful tool to compensate the rebound effect. 17/17

19 Thanks for your attention! Jaume Freire González