Estimating the economy-wide rebound effect using empirically identified structural vector autoregressions

Abstract

The size of the economy-wide rebound effect is crucial for estimating the contribution that energy efficiency improvements can make to reducing greenhouse gas emissions and for understanding the drivers of energy use. Existing estimates, which vary widely, are based on computable general equilibrium models or partial equilibrium econometric estimates. Using a structural vector autoregressive (SVAR) model, we identify the dynamic causal impact of structural shocks, including an energy efficiency shock. The identification method is based on independent component analysis. In this manner, we are able to estimate the rebound effect with a minimum of a priori assumptions. We apply the SVAR to U.S. monthly and quarterly data, finding that after four years rebound is around 100%, which implies that in the long run no energy is saved.