Three essays on rebound effects

This thesis investigates three major aspects of energy consumption rebound effects (RE) in three papers. More specifically, the issues addressed are (i) the magnitude of economy-wide rebound effect (ii) the role of energy policy instruments in mitigating it and (iii) its channels of impact. The research begins with the estimation of cross-country economy-wide rebound effects for a panel of 55 countries over the period 1980 to 2010. A two-stage approach is utilized in which energy efficiency is first estimated from a stochastic input distance frontier (SIDF). The estimated energy efficiency is then used in a second stage dynamic panel model to derive short-run and long-run RE for an array of developing and developed countries. The cross-country point estimates indicate substantial RE magnitudes across sampled countries during the period under consideration, although a positive and encouraging finding is the declining RE trend across most of the sampled countries during the study period. The second paper contains an RE benchmark for 19 EU countries, as well as an investigation of the effects of two energy policy instruments (energy taxes and ener-gy R&D) on RE performance over the period 1995 to 2010. The results indicate that RE performance improved over the sample period, reinforcing the results from paper one. In addition, there is also some evidence suggesting that binding market-based instruments such as energy taxes have been more effective in restricting RE than in-direct instruments such as energy R&D during the period under consideration. This is consistent across both estimated model specifications. An important observation from the first essay is the slightly larger average RE across the non-OECD countries. For this reason, the last empirical chapter evaluated the channels through which RE stimulated energy use across productive sectors of major developing/emerging economies, namely Brazil, Russia, India, Indonesia and China. To achieve this, the essay relied on duality theory to decompose changes in energy demand into substitution and output effects through the estimation of a trans-log cost function using data spanning 1995-2009. Findings reveal that energy use elasticities across sampled sectors/countries are dominated by substitution effects. One intriguing result that also emerges from this analysis is the role of economies of scale and factor accumulation, rather than technical progress, in giving rise to eco-nomic growth and energy consumption in these countries during the period under consideration

Fuel subsidies versus market power : is there a countervailing second-best optimum?

Fuel subsidies distort end-use prices below cost, resulting in overconsumption and huge environmental cost. On the other hand, the mark-up over cost due to the exercise of market power results in the social loss of consumer surplus. We open a new line of inquiry into the potential for a market-based solution from these two countervailing forces: can the two offsetting distortions conceivably achieve a second- best optimum? Relying on dynamic panel techniques and gasoline market data for 68 developing countries, we uncover an excessive second-best subsidy offset to market power mark-up on the order of 4.5. Our results indicate that the potential for policy failure strongly exceeds the potential for market failure in our model, and gasoline prices across our sample may not be aligned with vigorous anti-climate change policy