Economy-wide estimates of energy rebound effect: Evidence from China's provinces

Abstract

The ongoing debate on the magnitude of China's economy-wide energy rebound effect (RE) entails further investigations not only with more details, but also with more credible methods. In this study, a modified two-stage approach, which could avoid methodological issues regarding RE estimation, is applied to estimate macroeconomic RE with a data panel of 30 provinces in China during the period 1997–2015. In particular, in order to comprehensively measure energy efficiency, we construct a dynamic energy efficiency indicator which considers not only the static efficiency of energy use but also the technical change regarding energy usage. Using dynamic panel data models, we estimate the elasticity of energy consumption with respect to energy efficiency which directly links to the measurement of RE. The short-run and long-run estimates of RE are reported, and the 95% confidence interval was computed for each sample based on the nonparametric bootstrap method to further analyze the macroeconomic RE of different regions. Results indicate that the average RE of all provinces is 88.55% in the short run, and the average long-run RE is 77.50%; the RE in the developed eastern region continuously decreased, while RE in the western region increased to be the largest during the research period.