Regional energy rebound effect: The impact of economy-wide and sector level energy efficiency improvement in Georgia, USA

Rebound effect is defined as the lost part of ceteris paribus energy savings from improvements on energy efficiency. In this paper, we investigate economy-wide energy rebound effects by developing a computable general equilibrium (CGE) model for Georgia, USA. The model adopts a highly disaggregated sector profile and highlights the substitution possibilities between different energy sources in the production structure. These two features allow us to better characterize the change in energy use in face of an efficiency shock, and to explore in detail how a sector-level shock propagates throughout the economic structure to generate aggregate impacts. We find that with economy-wide energy efficiency improvement on the production side, economy-wide rebound is moderate. Energy price levels fall very slightly, yet sectors respond to these changing prices quite differently in terms of local production and demand. Energy efficiency improvements in particular sectors (epicenters) induce quite different economy-wide impacts. In general, we expect large rebound if the epicenter sector is an energy production sector, a direct upstream/downstream sector of energy production sectors, a transportation sector or a sector with high production elasticity. Our analysis offers valuable insights for policy makers aiming to achieve energy conservation through increasing energy efficiency. - Highlights: • We developed a CGE model to investigate economy-wide energy rebound in Georgia, USA. • The CGE model has detailed treatment for different energy inputs for production. • The model has a highly disaggregated sector profile helpful for policy making. • We compared the economy-wide impact shocks in different epicenter sectors. • We analyzed why epicenters generate dramatically different economy-wide impacts.