The importance of energy price stickiness and real wage inflexibility for the time paths of rebound effects

Research output: Working paperDiscussion paper

Abstract

There has been some controversy over the relative sizes of the short- and long-run rebound effects associated with energy efficiency improvements. Theoretical analysis by Wei (2007) and Saunders implied that the rebound effects would always be greater in the long-run than in the short-run. However, Allan et al (2007) and Turner (2009) found evidence from Computable General Equilibrium simulations that contradicted this result. In this paper we systematically explore the impact of energy price stickiness and real wage inflexibility for the evolution of rebound effects. We find that: the degree of energy price, but not wage, stickiness is an important determinant of the time path of rebound effects and of its relative size in the short- and long-runs; and that there is considerable variation in the scale of rebound effects through time, even where short-run rebound effects are lower than in the long-run. However, the most significant finding overall is that rebound reflects the system-wide interaction between energy producing and energy using sectors.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Number of pages33
Publication statusPublished - 30 Apr 2018

Publication series

NameDiscussion Papers in Economics
PublisherUniversity of Strathclyde
No.18-04

Fingerprint

Price stickiness
Energy prices
Real wages
Rebound effect
Short-run
Energy efficiency
Simulation
Interaction
Wage stickiness
Rebound
Theoretical analysis
Computable general equilibrium
Energy sector
Energy

Keywords

  • energy efficiency
  • evolution of energy rebound
  • price stickiness
  • real wage inflexibility

Cite this

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abstract = "There has been some controversy over the relative sizes of the short- and long-run rebound effects associated with energy efficiency improvements. Theoretical analysis by Wei (2007) and Saunders implied that the rebound effects would always be greater in the long-run than in the short-run. However, Allan et al (2007) and Turner (2009) found evidence from Computable General Equilibrium simulations that contradicted this result. In this paper we systematically explore the impact of energy price stickiness and real wage inflexibility for the evolution of rebound effects. We find that: the degree of energy price, but not wage, stickiness is an important determinant of the time path of rebound effects and of its relative size in the short- and long-runs; and that there is considerable variation in the scale of rebound effects through time, even where short-run rebound effects are lower than in the long-run. However, the most significant finding overall is that rebound reflects the system-wide interaction between energy producing and energy using sectors.",
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The importance of energy price stickiness and real wage inflexibility for the time paths of rebound effects. / Figus, Gioele; McGregor, Peter G; Swales, J Kim; Turner, Karen.

Glasgow : University of Strathclyde, 2018. (Discussion Papers in Economics; No. 18-04).

Research output: Working paperDiscussion paper

TY - UNPB

T1 - The importance of energy price stickiness and real wage inflexibility for the time paths of rebound effects

AU - Figus, Gioele

AU - McGregor, Peter G

AU - Swales, J Kim

AU - Turner, Karen

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N2 - There has been some controversy over the relative sizes of the short- and long-run rebound effects associated with energy efficiency improvements. Theoretical analysis by Wei (2007) and Saunders implied that the rebound effects would always be greater in the long-run than in the short-run. However, Allan et al (2007) and Turner (2009) found evidence from Computable General Equilibrium simulations that contradicted this result. In this paper we systematically explore the impact of energy price stickiness and real wage inflexibility for the evolution of rebound effects. We find that: the degree of energy price, but not wage, stickiness is an important determinant of the time path of rebound effects and of its relative size in the short- and long-runs; and that there is considerable variation in the scale of rebound effects through time, even where short-run rebound effects are lower than in the long-run. However, the most significant finding overall is that rebound reflects the system-wide interaction between energy producing and energy using sectors.

AB - There has been some controversy over the relative sizes of the short- and long-run rebound effects associated with energy efficiency improvements. Theoretical analysis by Wei (2007) and Saunders implied that the rebound effects would always be greater in the long-run than in the short-run. However, Allan et al (2007) and Turner (2009) found evidence from Computable General Equilibrium simulations that contradicted this result. In this paper we systematically explore the impact of energy price stickiness and real wage inflexibility for the evolution of rebound effects. We find that: the degree of energy price, but not wage, stickiness is an important determinant of the time path of rebound effects and of its relative size in the short- and long-runs; and that there is considerable variation in the scale of rebound effects through time, even where short-run rebound effects are lower than in the long-run. However, the most significant finding overall is that rebound reflects the system-wide interaction between energy producing and energy using sectors.

KW - energy efficiency

KW - evolution of energy rebound

KW - price stickiness

KW - real wage inflexibility

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