Does Higher Energy Efficiency Lower Economy-Wide Energy Use?

Sebastian Rausch and Hagen Schwerin

No 18/299, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We develop a general equilibrium growth model with capital and energy use to examine the hypothesis that economy-wide energy use increases with energy efficiency. To obtain energy use that would have occurred in the absence of energy efficiency changes, chosen energy efficiency is induced by technological change. Viewing technological change in form of changes in the cost of capital and energy producing energy services enables us to control for the sources of energy efficiency improvements in a counterfactual setting. Calibrating the model to the post-WWII U.S. economy, we find that higher energy efficiency increased rather than reduced energy use, because lower capital cost enhanced energy use by more than the increase in energy cost reduced it. This casts strong doubts on the view that energy-saving technological change has lowered fossil energy use.

Keywords: energy use; energy efficiency; energy rebound; efficiency paradox; Jevons paradox; energy-saving technological change; investment-specific technological change; general equilibrium; putty clay (search for similar items in EconPapers)
JEL-codes: D13 E23 O30 O41 Q43 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2018-10
New Economics Papers: this item is included in nep-ene, nep-gro, nep-mac and nep-reg
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Citations: View citations in EconPapers (8)

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