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

Gioele Figus, Peter McGregor, J Kim Swales () and Karen Turner
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J Kim Swales: Department of Economics, University of Strathclyde

No 1804, Working Papers from University of Strathclyde Business School, Department of Economics

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.

Keywords: energy efficiency; evolution of eneregy rebound; price stickiness; real wage inflexibility (search for similar items in EconPapers)
JEL-codes: C68 D58 Q43 Q48 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2018-03
New Economics Papers: this item is included in nep-ene and nep-reg
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