Costs of energy efficiency mandates can reverse the sign of rebound

Abstract

Rob Williams, and participants at various presentations and conferences. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Power markets in transition: Decarbonization, energy efficiency, and short-term demand response

“…For parsimony, we use the term energy efficiency investments to refer to accumulated additions. 22 Note that we assume that the already existing level of energy efficiency only impacts the remaining energy efficiency potential. Moreover, we assume that the existing level of energy efficiency does not depreciate.…”

“…This allows determining the remaining energy efficiency potential and its costs for each sector in a region. 22…”

“…See[10,13,47] for theoretical contributions and[30,41,58] for literature reviews. 7 See[22,8] for a more detailed decomposition.…”

General Equilibrium Rebound from Energy Efficiency Innovation

“…Wei (2010) considers a setting with only a single consumption good and does not model the production of energy. Concurrently with the present paper, Böhringer and Rivers (2018) and Fullerton and Ta (2019) use linearization techniques to study settings with one or two consumption goods. By explicitly solving for energy resource use in a dual setting that treats prices as independent variables, my analysis demonstrates precisely which price changes generate each general equilibrium channel and thus further develops intuition for general equilibrium consequences.…”

“…Further, whereas Böhringer and Rivers (2018) allow only a single general equilibrium channel at a time, I capture interactions between multiple general equilibrium channels. And whereas Fullerton and Ta (2019) study improvements in the efficiency with which households use energy, I study improvements in firms' energy efficiency, which are important both because households represent only 36% of U.S. energy use and because the computable general equilibrium literature has almost exclusively studied improvements in firms' energy efficiency. 6 The present setting also differs from Fullerton and Ta (2019) in allowing for channels such as labor supply decisions and households' substitution among consumption goods.…”