The Rebound Effect in Swedish Heavy Industry

Abstract

Energy efficiency improvement (EEI) benefits the climate and matters for energy security. The potential emission and energy savings due to EEI may however not fully materialize due to the rebound effect. In this study, we measure the size of rebound effect for the two energy types fuel and electricity within the four most energy intensive sectors in Swedenpulp and paper, basic iron and steel, chemical, and mining. We use a detailed firm-level panel data set for the period 2000-2008 and apply Stochastic Frontier Analysis (SFA) for measuring the rebound effect. We find that both fuel and electricity rebound effects do not fully offset the potential for energy and emission savings. Furthermore, we find 2 CO intensity and fuel and electricity share as the two main determinants of rebound effect in Swedish heavy industry. Our results seems to imply that it matters both to what extent and where to promote EEI, as the rebound effect varies between sectors as well as between firms within sectors.

Is Industrial Energy Inefficiency Transient or Persistent? Evidence from Swedish Manufacturing

“…This study showed that four sectors were almost fully energy efficient given the technology available to them at the time. This result to some extent differs to the findings Lundgren et al (2016) and Amjadi et al (2018), which estimated fuel and electricity efficiencies. The differences could be explained by the choice of different SFA models.…”

“…The present study used the fourcomponent SFA model, which is capable of decomposing overall inefficiency into its persistent and transient parts and of separating firm effects from inefficiency and noise. In contrast, Lundgren et al (2016) applied True Random Effect model of Greene (2005), which did not separate persistent efficiency from firm heterogeneity, while the model used by Amjadi et al (2018) did not fully control for firm-effects nor separate persistent and transient components of overall inefficiency. Furthermore, Lundgren et al (2016) and Amjadi et al (2018) estimated fuel and electricity efficiency separately for a shorter time period, i.e., [2000][2001][2002][2003][2004][2005][2006][2007][2008].…”

Assessing the Rebound Effect in Energy Intensive Industries: A Factor Demand Model Approach with Asymmetric Price Response

“…Using this approach the substitution rebound effect is directly estimated from marginally improving technical energy efficiency. Amjadi et al (2017) find significant rebound effects from energy technical efficiency improvements regarding both fuel and electricity input in the Swedish energy intensive sectors, Iron and steel, Pulp and paper, Chemical, and Mining during 2000-2008. The average rebound effects for these sectors are 54, 31, 42, and 50 percent, respectively.…”

“…A recently arisen part of the literature, originating from Orea et al (2015), bases its analyses on the Stochastic Frontier Analysis (SFA) approach. 8 Inspired by Orea et al (2015), who measure the rebound effect in US residential energy consumption, Amjadi et al (2017) is the first study using this approach to estimate the rebound effect based on data from the energy intensive industry. In this case the rebound effect is determined by the technical inefficiency component of the stochastic part of the firms' energy demand frontier, which is derived from the minimized short-run cost function.…”

“…More efficient use of energy can be due to both technological development and improving technical efficiency. The latter suggested by Orea et al (2015) and Amjadi et al (2017). The overall effect of technological development and improved technical efficiency can together give a different picture of the rebound effect than the picture given by these factors individually.…”