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Re-Identifying the Rebound: What About Asymmetry?

Abstract:
Rebound effects measure the behaviorally induced offset in the reduction of energy consumption following efficiency improvements. Using panel estimation methods and household travel diary data collected in Germany between 1997 and 2009, this study identifies the rebound effect in private transport by allowing for the possibility that fuel price elasticities--from which rebound effects can be derived--are asymmetric. This approach rests on empirical evidence suggesting that the response in individual travel demand to price increases is stronger than to decreases. We argue that such an asymmetric response would require referencing price elasticities derived from price decreases in order to identify the rebound effect, as it represents the response to a decrease in unit cost for car travel due to improved fuel efficiency. Failing to reject the null hypothesis of a symmetric price response, we alternatively estimate a reversible specification and obtain a rebound estimate for single-vehicle households being in the range of 46 to 70%, which is in line with an earlier German study by Frondel, Peters, and Vance (2008).

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Modeling – Energy Data, Modeling, and Policy Analysis; Energy Efficiency

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Q55 - Environmental Economics: Technological Innovation

Keywords: Automobile travel, Panel estimation models, Price asymmetry

DOI: 10.5547/01956574.34.4.3

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Published in Volume 34, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.