Unraveling the Interplay of Substitution Elasticities and the Green Energy Rebound Effect

Verónica Acurio Vásconez and Mónica Pereira Henriques

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper explores the nuanced interplay between the green energy rebound effect and the elasticity of substitution within a Solow growth model. Our study characterizes how the rebound effect varies with the elasticity of substitution between production factors. Our findings demonstrate that technological progress in green or fossil energy leads to different consumption patterns depending on the elasticity of substitution. For substitution elasticities below one, technological advances result in slower increases in energy consumption relative to labor growth, while for elasticities above one, energy consumption accelerates. These insights underscore the critical role of substitution elasticities in shaping effective energy policies, highlighting opportunities to mitigate the rebound effect and promote sustainable energy transitions.

Keywords: rebound effect; energy transition; Solow model; elasticity of substitution. (search for similar items in EconPapers)
JEL-codes: E13 O41 O44 Q43 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2025-12

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