Rebound effects in firms depend principally on the ability of firms to take better advantage of now-cheaper energy services. This is especially true for new productive capacity. If long-term substitution is high, rebound effects can be substantial. In addition, output effects contribute to rebound for energy intensive firms with a high elasticity of demand for their products (that is, where consumers are very responsive to changes in the price of their products and demand more product as prices fall). Improvements in energy productivity at firms can also contribute to greater economic activity and growth, driving up energy demand overall. In general, rebound effects are higher for efficiency in productive sectors of the economy than for end-use consumer efficiency. This is notable, because two-thirds of the energy consumed in the United States is consumed in the productive sectors of the economy and “embedded” in the non-energy goods and services purchased by consumers.32 In China, India, and many other developing economies, an even greater share of energy is consumed for productive activities.
Category: Energy Efficiency