Tracking the sources of rebound effect resulting from the efficiency improvement in petrol, diesel, natural gas and electricity consumption; A CGE analysis for Iran

Abstract

Rebound Effect (RE) has been resulted in energy saving failing short of expectations from energy efficiency improvement (EEI) policy. Measuring RE resulting from the EEI has attracted the attention of many economists and politicians; however, tracking the factors sourcing RE has been addressed by a few studies. The main purpose of this study is to track and quantify the factors sourcing the RE resulting from 5%, 7%, and 10% EEI shocks at macro and sector levels in Iran. Using a Computable General Equilibrium (CGE) model, the economy-wide rebound effect (EWRE) was decomposed at a macro-level for 15 production sectors and final demand separately and the RE of production sectors has been decomposed for substitution and output effects separately. Findings show that the EEI shocks have resulted in positive growth in macroeconomic variables including investment, employment, and GDP. The results from the decomposition of RE at the macro-level show that, first, households are one of the main sectors sourcing RE, second, sectors that are the largest consumers of energy have the greatest RE. Other results indicate a non-linear variation in RE resulting from different EEI shocks and the dominant role of substitution effect on RE of production sectors in the short-term.