Rebound Effect from Income Savings Due to an Energy Efficiency Improvement by Households: An Input–Output Approach

Abstract

In previous studies on the indirect rebound effect due to income saved from energy efficiency improvement by households in an input–output model, household income is typically assumed constant before and after an efficiency improvement of their energy use. The assumption is implausible if we observe that households may not re-spend the saved income, which potentially reduces their consumption and national income including households, at least in the short term, in a country like China, where they have high saving propensity. In addition, income of other economic agents than households may also be affected. In this article, we provide an improved input–output model to clarify the issue and then use the 2017 input–output data of China to illustrate the potential indirect rebound effect due to household income saved from an energy efficiency improvement. Our results show that if the income impact in the short term is properly considered, then the indirect rebound effect due to the income savings could be trivial at the national level while still considerable at the household level. Hence, the indirect rebound effect at the household level alone is likely misleading for national policy makers by providing an overestimated value of the short-term indirect rebound effect.

Keywords

• input–output
• income savings
• indirect rebound effect
• households
• China