The Added Value from a General Equilibrium Analyses of Increased Efficiency in Household Energy Use

Lecca, Patrizio and McGregor, Peter and Swales, J. Kim and Turner, Karen (2013) The Added Value from a General Equilibrium Analyses of Increased Efficiency in Household Energy Use. Discussion paper. University of Strathclyde, Glasgow.

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    Abstract

    The aim of the paper is to identify the added value from using general equilibrium techniques to consider the economy-wide impacts of increased efficiency in household energy use. We take as an illustrative case study the effect of a 5% improvement in household energy efficiency on the UK economy. This impact is measured through simulations that use models that have increasing degrees of endogeneity but are calibrated on a common data set. That is to say, we calculate rebound effects for models that progress from the most basic partial equilibrium approach to a fully specified general equilibrium treatment. The size of the rebound effect on total energy use depends upon: the elasticity of substitution of energy in household consumption; the energy intensity of the different elements of household consumption demand; and the impact of changes in income, economic activity and relative prices. A general equilibrium model is required to capture these final three impacts.