Prices, technology development and the rebound effect

Energy efficiency is the critical parameter for policies that aim at reducing energy consumption while maintaining or even boosting economic growth. The two main options to influence energy efficiency are changes in relative prices, i.e., raising the price of energy through economic instruments, or...

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Bibliographic Details
Published in:Energy policy 2000-06, Vol.28 (6), p.457-469
Main Authors: Birol, Fatih, Keppler, Jan Horst
Format: Article
Language:English
Subjects:
Economic growth
Energy consumption
Energy efficiency
Energy policy
Energy prices
Policy mix
Prices
Pricing policies
Productivity
Rebound effect
Studies
Technological change
Technological efficiency improvements
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Summary:Energy efficiency is the critical parameter for policies that aim at reducing energy consumption while maintaining or even boosting economic growth. The two main options to influence energy efficiency are changes in relative prices, i.e., raising the price of energy through economic instruments, or to introduce new technologies which increase the productivity of each unit of energy. This paper is based on the notion that in an equilibrium economy the marginal economic productivity is identical for all factors, i.e., energy, labour, knowledge and capital. From this premise two main conclusions can be drawn. First, any change in price or technology will have an impact on the whole economy by creating feedbacks through the substitution of factors of production and goods, as well as increased wealth. Second, the two policy approaches, changing relative prices and technology development, are not opposite to each other. They are the two faces of the same reality and should be developed and promoted simultaneously and consistently.
ISSN:0301-4215
1873-6777
DOI:10.1016/S0301-4215(00)00020-3