Firm-level energy rebound effects and relative efficiency in the German manufacturing sector

Abstract

Energy use has not decreased significantly over the last decade even though energy efficiency has increased in Germany. The lacking impact of recent energy efficiency measures could be related to growth-induced rebound effects. To quantify and understand these rebound effects and identify rebound-driving and rebound-mitigating firm characteristics, we analyze an official micro-level data set in the German manufacturing sector, with information on more than 16,000 firms. A prerequisite for the rebound estimation is the dynamic analysis of firms’ relative efficiency scores. To this end, we apply quantile regression including fixed effects. We find that a comparative reduction of energy in a firm’s production process is associated with a reduced energy use in the following years. However, we also found that 4.5 to 5.3% of potential energy savings at the firm level are on average eaten up by expanding production in the subsequent periods. At face value, this growth-induced rebound effect is small. However, our analysis shows that the magnitude of the rebound effect is not constant but depends on characteristics and investment decisions of the respective firms.