The role of energy efficiency in CO2mitigation – Economy wide rebound effect in ASEAN countries

Abstract

Improving energy efficiency is expected to reduce energy consumption. However, the existence of a "rebound effect", can increase energy consumption, as an improvement in energy efficiency makes energy cheaper. The current study examines the contribution of energy efficiency improvements towards mitigating CO <inf xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">2</inf> emissions, through the estimation of the "rebound effect" existence for a panel of Southeast Asian (ASEAN) countries in the period 1990-2014. In a first step, it is applied the Stochastic Frontier Analysis to calculate the energy efficiency, and secondly, two-stage Generalized Methods of Moments is applied for the short and long run efficiency elasticities of energy. Furthermore, we calculate the rebound effect with the help of the energy efficiency elasticities. Our conclusions show that in the short-run there is a backfire effect, that means the energy efficiency gains are outweighed by an increased demand for energy, and in the long run, there is only a partial rebound.