A hybrid energy system model to evaluate the impact of climate policy on the manufacturing sector: Adoption of energy-efficient technologies and rebound effects

Abstract

Improving efficiency is an important option for reducing manufacturing sector emissions. More efficient technologies reduce energy use and emissions. However, efficiency improvements can induce unexpected effects known as rebound effects. Although previous studies have analyzed these effects, these studies fail to precisely evaluate the rebound effects due to improvements in technology efficiency. Bottom-up models are appropriate for analyzing efficiency improvements at the technology level, but they face limitations in exploring output changes because they usually assume that demand is given. In contrast, top-down models are appropriate for observing output changes in an efficiency-improving sector and in the rest of the economy, but they face limitations in explicitly describing technological changes. This study therefore constructs a hybrid model to overcome the limitations of both types of models and evaluates the impacts of climate policy in Korea’s manufacturing sector when rebound effects are considered. The expected emissions reduction due to new technology adoption in the manufacturing sector is 23.8 million tons CO2eq without rebound effects, but when rebound effects are included, the actual emission reduction (12.7 million tons CO2eq) is about 50% of the expected amount.