SLIDE 1
PRESENTATION TO THE 37TH ANNUAL IAEE INTERNATIONAL CONFERENCE, NEW YORK CITY, MONDAY 16 JUNE 2014 Karen Turner, Centre for Energy, Resource and Environmental Studies (CERES), Heriot-Watt University, Edinburgh, Scotland (K.Turner@hw.ac.uk) Co-authored with Simon Koesler (ZEW, Mannheim, Germany) and Kim Swales (University of Strathclyde, Glasgow, Scotland)
SLIDE 2 Potential for ‘rebound effects’ from increased energy efficiency to erode
potential/expected energy savings subject of much academic debate and policy concern
Increased efficiency in industrial/productive energy use? Rebound
trigger: lowers marginal cost of energy services
Encouraging increased use of energy service in question Lowering output price, boosting economic productivity and
competitiveness
Both in sector where efficiency improves and downstream Process of productivity-led economic growth, extent of which is
determined by conditions in economy in question
Economy-wide rebound studies, mainly using CGE techniques (and
focusing on efficiency in productive energy use) have tended to have a national focus
What if we extend focus to the global economy? Important where have policy frameworks such as EU 20-20-20 – can we
assume that energy efficiency changes in one country and energy use in
Will rebound grow as expand boundaries of the economy?
We calculate rebound (%) as 1+(AES/PES).100, where reflect share of total energy
use affected by efficiency improvement through parameter attached to PES
SLIDE 3
Concerned with international spillover effects Don’t get clear signals from trade theory – 2x2x2 models don’t consider
intermediates (focus on final goods/services) or changes in efficiency in use of intermediates
So need a numerical model to experiment with Here, global CGE – Germany, other EU27 (aggregated to one region in
results) and ‘rest of the world’
8 sectors per region, including 2 produced energy supply (electricity and
gas, E, and coke, refined petroleum and nuclear, CPN)
Restrictive assumptions for first step – fixed non-produced factors at
national level, no investment or excess labour supply, just mobility across sectors in response to changing returns
Model exogenous and costless increase in energy-augmenting
technological progress in KLEM production function at KE nest
Get some surprising results to try to explain: Key – rebound doesn’t rise as expand boundaries of the economy Falls – due to combination of relative competitiveness and energy supply
effects
SLIDE 4
- Positive supply shock giving
boost to demand for German manufacturing – more competitive
- But negative demand shock to
energy supply in Germany – reduced intermediate demand
- Positive multiplier effects in
- ther sectors but also crowding
- ut because increased factor
prices
- Replacement with output by
external sectors (where smaller increase in factor and output prices)
- Only negative external impacts
in (1) ROW electricity and gas (Russia) as direct supplier to German manufacturing; (2) REU and ROW manufacturing (only small net boost to global sector in value terms) Table 5 Changes in sectoral price, output and energy use Scenario 2: 10% increase in energy efficiency in German manufacturing
Scenario 2 Price Output Energy use GER E 0.2732%
SER 0.3186% 0.0675% 0.0612% TRN 0.2820%
CON 0.2368% 0.1145% 0.0690% MAN
0.4328%
CPN 0.1741%
FOB 0.2479%
PRI 0.2628%
REU E 0.0065% 0.0073% 0.0053% SER 0.0044% 0.0059% 0.0044% TRN 0.0059% 0.0292% 0.0296% CON 0.0026% 0.0032% 0.0018% MAN
CPN 0.0057%
FOB 0.0059% 0.0872% 0.0842% PRI 0.0062% 0.0403% 0.0395% ROW E 0.0000%
SER 0.0002% 0.0014% 0.0019% TRN 0.0005% 0.0087% 0.0085% CON 0.0000% 0.0002% 0.0001% MAN
CPN 0.0001% 0.0003%
FOB 0.0005% 0.0113% 0.0115% PRI 0.0001% 0.0027% 0.0025%
SLIDE 5
- General equilibrium rebound
effects at all levels
- In own-sector, not restricted to
direct rebound
- Net decrease total industrial
energy use all regions, reflecting crowding out, and also negative demand shock in case of energy
- Increased returns to labour and
capital boost household energy use in Germany (and also slightly in REU)
- Other scenario – 10% increase
energy efficiency in ALL German production sectors
- Similar pattern of results
- But energy supply effects much
more important….
Table 3 General equilibrium rebound effects Scenario 1: 10% increase in energy efficiency in all German sectors
Own-country production Rp Own-country total Rd Global EU Rg World Rg Rebound [%] 46.60 50.18 47.28 46.58 Change [percentage points] 3.58
Table 6 General equilibrium rebound effects Scenario 2: 10% increase in energy efficiency in German manufacturing
Own-sector Ri Own-country production Rp Own-country total Rd Global EU Rg World Rg Rebound [%] 56.44 47.63 51.31 50.22 48.11 Change [percentage points]
3.68
SLIDE 6 INCOME EFFECTS
- Positive supply shock in Germany so
that, produce more, enable more consumption
- Spreads to REU and ROW through
increased imports to intermediate and final demands But also PRICE EFFECTS
- Fixed factors – increased returns
- Enabling increased household
consumption
- But also putting upward pressure on
prices at home and abroad
- In Germany, partly mitigated by lower
input costs through energy efficiency increase
- But in REU and ROW, further
negative impact on relative competitiveness – net crowding out in FOB and PRI
Figure 3: Changes in sectoral price, output and energy use in Germany (Scenario 1)
- 8.00%
- 7.00%
- 6.00%
- 5.00%
- 4.00%
- 3.00%
- 2.00%
- 1.00%
0.00% 1.00% 2.00% E SER TRN CON MAN CPN FOB PRI Price Output Energy use
Figure 4: Changes in sectoral price, output and energy use in the rest of Europe (Scenario 1)
0.00% 0.10% E SER TRN CON MAN CPN FOB PRI Price Output Energy use
Figure 5: Changes in sectoral price, output and energy use in the rest of the World (Scenario 1)
- 0.05%
- 0.04%
- 0.03%
- 0.02%
- 0.01%
0.00% 0.01% 0.02% E SER TRN CON MAN CPN FOB PRI Price Output Energy use
SLIDE 7
- ENERGY SUPPLY EFFECTS
- General increase in efficiency also
applies to German energy supply so substitution in favour of domestic energy
- But, reduced demand for energy
from all German production sectors (efficiency and crowding
- ut)
- Coupled with decreased demand
in contracting external sectors
- Despite increased household
energy use
- Net impact – contraction in global
energy supply
- In short-run, excess capacity may
push energy supply prices down, exacerbating rebound
- But here (longer run outcome)
capital drawn away from energy, limiting price decrease and dampening rebound internally and externally
Figure 3: Changes in sectoral price, output and energy use in Germany (Scenario 1)
- 8.00%
- 7.00%
- 6.00%
- 5.00%
- 4.00%
- 3.00%
- 2.00%
- 1.00%
0.00% 1.00% 2.00% E SER TRN CON MAN CPN FOB PRI Price Output Energy use
Figure 4: Changes in sectoral price, output and energy use in the rest of Europe (Scenario 1)
0.00% 0.10% E SER TRN CON MAN CPN FOB PRI Price Output Energy use
Figure 5: Changes in sectoral price, output and energy use in the rest of the World (Scenario 1)
- 0.05%
- 0.04%
- 0.03%
- 0.02%
- 0.01%
0.00% 0.01% 0.02% E SER TRN CON MAN CPN FOB PRI Price Output Energy use
SLIDE 8
1.Previous work for Scotland and UK – importance of energy supply
response with ‘negative multiplier’ and ‘disinvestment’ effects dampening rebound over time
We’ve also found to be important in case of increased efficiency in household energy
use 2.General importance of supply responses – investment in capital, wage
setting and labour supply, international mobility etc.
Very simplistic treatments here in traditional neo-classical global model - priority areas
for international analyses 3.Source and nature of energy efficiency improvements – e.g. linking energy
use to capital goods that embody efficiency improvements in ‘production of energy services’
4.General issue of how we model energy supply – how are capacity and
price decisions made?
5.But also continued numerical experiments (with sensitivity analyses
targeting key elements of model specification) for efficiency improvements in different sectors
Here, difference in relative importance of energy supply and competitiveness/price
effects in determining contractions in rebound as expand boundaries
E.g. what if focus on increased general efficiency in energy supply itself?
SLIDE 9 = 1 +
(1) = 1 +
(2)
−
−
(3) = + ∆
−
(4) = + ∆
(5) 100
d g g d i
E R R E γ
−
= +
SLIDE 10 Table Y Changes in output [Billion 2009 USD] Scenario 2: 10% increase in energy efficiency in German manufacturing
Scenario 2 GER REU ROW Total across regions Total across sectors 5.002
2.169 Electricity & gas
0.054
Services 2.186 0.825 0.571 3.582 Transport
0.245 0.255 0.076 Construction 0.337 0.065 0.010 0.412 Manufacturing 6.631
0.085 Fuels (CPN)
0.005
Food, bev., tob.
0.824 0.424 0.308 Primary (extract)
0.315 0.200
SLIDE 11 Table X Changes in output [Billion 2009 USD] Scenario 1: 10% increase in energy efficiency in all German sectors
Scenario 1 GER REU ROW Total across regions Total across sectors 10.117
8.741 Electricity & gas
Services 9.647 1.364 1.158 12.169 Transport 1.006
0.113 Construction 1.222 0.035 0.006 1.263 Manufacturing 0.305 1.210 2.286 3.801 Fuels (CPN)
Food, bev., tob. 0.900
0.667 Primary (extract) 0.791
1.468
