Rebound Effects of Improved Electricity, Fossil Fuels and Energy Efficiency in Energy Intensive Industries: Computational General Equilibrium Model

Document Type : Research Paper


1 Ph.D Student of Economics Department Faculty of Social Sciences and Economics Alzahra University

2 Economics Department Faculty of Social Sciences and Economics Alzahra University

3 Associate Professor, Economics Department, Faculty of Social Sciences and Economics, Alzahra Universtiy


Energy-intensive industries in Iran are responsible for a significant share of energy consumption, especially oil products. According to the statistics, these industries account for use of 75% of fossil fuels in the total industrial energy use in 2011. Therefore, there is a major focus on promoting energy efficiency in such industries. Energy efficiency improvement results in rebound and backfire effects because reduction in energy demand is not appropriate with efficiency improvement. In this paper we estimate the effects of fuels, electricity and energy efficiency improvement in energy intensive industries based on computational general equilibrium model. Simulation is done for two main scenarios, including efficiency improvement for energy intensive industries and all sectors of economy. Results show that the rebound effects of electricity, fuels and energy efficiency increasing in chemical and basic metal industries are considerable (For instance, electricity, fuels and energy efficiency increasing leads to rebound effects of 63%, 84% and 72% in chemical industry in scenarios where the efficiency improved for only energy- intensive industries. Similarly, increasing efficiency in all economy sectors leads to rebound effects of 79%, 94% and 92% in chemical industry). In addition to demand decrement, efficiency improvement will result in reduction of production cost of energy intensive industries and energy prices.
JEL Classification: C68, Q41, Q43


Main Subjects

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Volume 53, Issue 4 - Serial Number 125
December 2018
Pages 855-880
  • Receive Date: 10 August 2017
  • Revise Date: 13 April 2018
  • Accept Date: 08 May 2018
  • First Publish Date: 22 December 2018