Long-Run Energy Use and the Efficiency Paradox

Sebastian Rausch and Hagen Schwerin

No 16/227, 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 theory of vintage capital and energy use in businesses and households to measure the response of energy use to energy-saving technological change. Both investment-specific technological progress and a higher energy price save energy by increasing energy efficiency, yet investment-specific technological progress spurs while a higher energy price depresses energy use. Calibration of the model's balanced growth path to U.S. post-WWII data shows that higher energy efficiency increased rather than reduced energy use. Investment-specific technological progress enhanced energy use by more than the increase in the energy price reduced it. Both neutral and investment-specific technological changes were major determinants of observed growth in energy use.

Keywords: Energy efficiency; energy rebound; energy-saving technological change; investment-specific technological change; household production; putty-clay (search for similar items in EconPapers)
JEL-codes: D13 E23 O30 O41 Q43 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016-01
New Economics Papers: this item is included in nep-ene, nep-ino and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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