Do Productivity Improvements Move Us Along the Environmental Kuznets Curve?

The Environmental Kuznets Curve (EKC) hypothesis focuses on the argument that rising prosperity will eventually be accompanied by falling pollution levels as a result of one or more of three factors: (1) structural change in the economy; (2) demand for environmental quality increasing at a more-than-proportional rate; (3) technological progress. Here, we focus on the third of these. In particular, energy efficiency is commonly regarded as a key element of climate policy in terms of achieving reductions in economy-wide CO2 emissions over time. However, a growing literature suggests that improvements in energy efficiency will lead to rebound (or backfire) effects that partially (or wholly) offset energy savings from efficiency improvements. Where efficiency improvements are aimed at the production side of the economy, the net impact of increased efficiency in any input to production will depend on the combination and relative strength of substitution, output/competitiveness, composition and income effects that occur in response to changes in effective and actual factor prices, as well as on the structure of the economy in question, including which sectors are targeted with the efficiency improvement. In this paper we consider whether increasing labour productivity will have a more beneficial, or more predictable, impact on CO2/GDP ratios than improvements in energy efficiency. We do this by using CGE models of the Scottish regional and UK national economies to analyse the impacts of a simple 5% exogenous (and costless) increase in energy or labour augmenting technological progress.Scomputable general equilibrium models; technical progress; energy efficiency; labour productivity; environmental kuznets curve

Supply constraints on rebound effects of increased energy efficiency : negative multiplier and disinvestment effects

Policies that aim to use increased energy efficiency to reduce energy use may not achieve the desired results due to the likelihood of rebound effects. Research from our current ESRC-funded project on this topic was presented in an article in the last issue of Fraser Economic Commentary titled, ‘Energy Efficiency and the rebound effect’ (Turner, 2009a). As explained there, the rebound effect occurs when an energy efficiency improvement causes a decrease in the effective or implicit price of energy as an input to production (or consumption) – i.e. the cost of energy required per unit of activity falls as efficiency improves.1 Moreover, if there is local production/distribution of energy (or energy services) the reduction in demand for energy as efficiency improves will put downward pressure on the actual (local) energy price

Reconsidering the calculation and role of environmental footprints

Following the recent Copenhagen Climate Change conference, there has been discussion of the methods and underlying principles that inform climate change targets. Climate change targets following the Kyoto Protocol are broadly based on a production accounting principle (PAP). This approach focuses on emissions produced within given geographical boundaries. An alternative approach is a consumption accounting principle (CAP), where the focus is on emissions produced globally to meet consumption demand within the national (or regional) economy1. Increasingly popular environmental footprint measures, including ecological and carbon footprints, attempt to measure environmental impacts based on CAP methods. The perception that human consumption decisions lie at the heart of the climate change problem is the impetus driving pressure on policymakers for a more widespread use of CAP measures. At a global level of course, emissions accounted for under the production and consumption accounting principles would be equal. It is international trade that leads to differences in emissions under the two principles. This paper, the second in this special issue of the Fraser Commentary, examines how input-output accounting techniques may be applied to examine pollution generation under both of these accounting principles, focussing on waste and carbon generation in the Welsh economy as a case study. However, we take a different focus, arguing that the ‘domestic technology assumption’, taken as something of a mid-point in moving between production and consumption accounting in the first paper, may actually constitute a more useful focus for regional policymakers than full footprint analyses

The Rebound Effect: Some Questions Answered

Greenhouse gas (and other pollutant) emissions from energy use are now taken to be a problem both internationally and for individual national and regional governments. A number of mechanisms are being employed to reduce energy consumption demand as part of climate and energy policies internationally. A central policy focus is increased efficiency in the use of energy. However, the straightforward link between increased energy efficiency and reduced energy consumption has been questioned. This is due to the notion of the ‘rebound effect’. Rebound occurs when improvements in energy efficiency actually stimulate the direct and indirect demand for energy in production and/or consumption. It is triggered by the fact that an increase in the efficiency in the use of energy acts to reduce the implicit price of energy, or the price of effective energy services for each physical unit of energy used. Thus, it is an economic phenomenon. The rebound effect implies that measures taken to reduce energy use might lead to increases in carbon emissions, or at least not offset them to the extent anticipated. It is possible to distiguish between direct rebound effects in energy consumption in the activity where energy efficiency has increased, indirect rebound effects from income and substitutuion effects and economy-wide rebound effects (impacts on macro-level energy use). This paper attempts to provide a non-technical overview of work on the latter, carried out under an ESRC-funded project investigating the source and magnitude of econom-wide rebound effects from increased energy efficiency in the UK.General equilibrium, energy efficiency, rebound effects, disinvestment.

Introduction : Special Edition : Energy and Pollution [January 2011]

[Abstract unavailable

Disaggregating the Household Sector in a 2004 UK Input Output Table and Social Accounting Matrix by Income Quintiles

This paper disaggregates a UK Input-Output (IO) table for 2004 based on household income quintiles from published survey data. In addition to the Input-Output disaggregation, the household components of a UK Income Expenditure (I-E) account used to inform a Social Accounting Matrix (SAM),have also been disaggregated by household income quintile. The focus of this paper is on household expenditure on the UK energy sector

The Rebound Effect: Some Questions Answered

Greenhouse gas (and other pollutant) emissions from energy use are now taken to be a problem both internationally and for individual national and regional governments. A number of mechanisms are being employed to reduce energy consumption demand. A central one is increased efficiency in the use of energy. The Intergovernmental Panel on Climate Change (IPCC) of the United Nations (IPCC, 2007) projects that by 2030 energy efficiency gains will provide a substantial part of the remedy for climate change by reducing global energy consumption to approximately 30% below where it would otherwise be. Such a reduction is argued to be almost sufficient to offset energy consumption increases driven by projected global economic growth. Similarly the widely cited Stern report (Stern, 2007), and the International Energy Agency (e.g. IEA, 2009), attach crucial importance to the potential for efficiency improvements to reduce energy use and related emissions. Within the European Union, one of the EU 20-20-20 targets for member states is to reduce energy consumption by 20% through increased energy efficiency (see, for example, European Commission, 2009). Moreover, the European Strategic Energy Technology Plan (SET-Plan) – see, for example, European Commission (2010) – places energy efficiency at the centre of its Smart Cities and European Electricity Grid Initiatives (among the European Industrial Initiatives (EII)). At the UK level, the UK Energy White Paper (2003) describes energy efficiency as one of the most cost effective and safest ways of addressing energy and climate policy objectives. In Scotland, the recently published ‘Energy Action Plan’, the Scottish Government sets out Scotland’s first national target to improve energy efficiency and how this will be achieved with the use of grants given to local authorities. In the Appendix to this paper, for the reader’s information, we provide a summary overview of energy efficiency policy instruments currently active within the UK and Scotland. The purpose of the current paper is to clarify some issues relating to the phenomenon of rebound effects. The paper originates from an interview with the Principle Investigator, Dr Karen Turner (University of Stirling, formerly of the University of Strathclyde) by Maggie Koerth-Baker, a science journalist working on a book for Wiley & Sons about the future of energy in the United States. The following is not a precise transcript of that interview; rather it picks out and develops key issues from the questions posed and the answers given

Incorporating jurisdiction issues into an analysis of carbon attributable to Welsh final consumption under different economic conditions: an integrated IO and CGE analysis

This paper considers the combined use of regional input-output (IO) and computable general equilibrium (CGE) methods to examine regional pollution problems from different consumption and production orientated perspectives. The first stage of the analysis involves using a regional input-output framework and data derived on direct CO2 (as carbon) generation by industry (and in household final consumption) to examine regional accountability for CO2 generation. In doing we consider an accounting method that permits greater accountability of regional private and public (household and government) final consumption as the main driver of regional carbon generation, while retaining focus on the local production, technology and consumption decisions that fall under the jurisdiction of regional policymakers. However, we go on to argue that a potential issue arising from the increasing focus on consumption-based „carbon footprint‟ type measures is that regional CO2 generation embodied in export production is attributed outside of the region, while regional consumers are likely to benefit from such production. We demonstrate our argument by using a regional CGE model to simulate the impacts of an increase in export demand for regional production on key macroeconomic variables, including GDP, employment and household consumption, as well as on different measures of CO2 attributable to regional consumption. In terms of the latter, we demonstrate how CGE model results may be used to create „post-shock‟ IO accounts to permit the calculation of CO2 generation under the various production and consumption accounting principles considered in the first part of the paper. Our empirical analyses focus on the case example of the Welsh regional economy and an anticipated increase in export demand for the output of one of the biggest polluting sectors, Iron and Steel production

The impact on the Scottish economy of reducing greenhouse gas emissions in Scotland: Illustrative findings from an experimental computable general equilibrium model for Scotland: Final Report October 2008

First paragraph: This project uses an experimental energy-economy-environment computable general equilibrium (CGE) model of the Scottish economy (AMOSENVI) to conduct illustrative simulations of the economic and environmental impacts of various options to reduce the generation of CO2 emissions (as the main greenhouse gas) in Scotland. These simulations are illustrative in nature because the process of appropriate database development and model specification for a comprehensive and accurate analysis of climate change policy issues for Scotland, while advanced relative to many regional (and even national) economies, is still in its very early stages. One of the key objectives of this project is to illustrate the potential value-added to Scotland's analytical capacity if further investment is made (by both the policy community, particularly in terms of data provision, and the research community, with public support, for example by seeking support from the research councils) in developing an appropriate CGE modelling framework

Disaggregating the Household Sector in a 2004 UK Input Output Table and Social Accounting Matrix by Income Quintiles

This paper disaggregates a UK Input-Output (IO) table for 2004 based on household income quintiles from published survey data. In addition to the Input-Output disaggregation, the household components of a UK Income Expenditure (I-E) account used to inform a Social Accounting Matrix (SAM),have also been disaggregated by household income quintile. The focus of this paper is on household expenditure on the UK energy sector.Disaggregated Household Expenditure, Energy Consumption, Input-Output, Income-Expenditure Accounts.