Energy efficiency and rebound effects in German industry - evidence from macroeconometric modeling

Increases in energy efficiency are reduced by the rebound effect. Efficiency gains on the micro level do not lead to proportionate reductions of energy consumption on the macro level. The German energy-economy model PANTA RHEI is applied to better understand the rebound effect. To get more robust estimates micro data from a cost structure survey of the German manufacturing sector was used to derive price elasticities of energy demand. The mesoeconomic rebound effect of an autonomous increase in energy efficiency at the industry level in manufacturing is between 7% in 2021 and 12% in 2030. The macroeconomic rebound effect lies between 12% in 2021 and 18% in 2030. Inclusion of necessary investment and assumptions of higher elasticities of substitution increase the effects. Rebound effects limit the scope of technology-driven efficiency improvements and must be considered in the design of ambitious energy efficiency programs and climate policies.

Automated summary

The rebound effect reduces the actual energy savings from efficiency improvements, especially on a macro level; the German PANTA RHEI model is used to study this effect and finds that price elasticity of energy demand plays a significant role; therefore, rebound effects must be carefully considered in the design of energy efficiency programs and climate policies.