Decomposition and measurement of the rebound effect: The case of energy efficiency improvements in Spain

Abstract The rebound effect caused by energy efficiency improvements demands greater attention from energy policymakers as it represents an important obstacle to energy consumption reduction measures. Despite the emerging literature about the rebound effect, no studies to date have managed to break down it. To do so, this study introduces the disruptive innovation of replacing the Logarithmic Mean Divisia Index method used in previous literature with Structural Decomposition Analysis. Based on Input-Output tables, a re-spending model allows us to assess the Indirect Rebound Effect for 14 productive sectors. Finally, Structural Decomposition Analysis enables us to determine the Economy-Wide Rebound Effect caused by energy efficiency improvements. As far as we are aware, no other study to date has done so. Spain is used as a case study for the 2000–2014 period. Major findings indicate that total rebound effect varies from nearly to 10% to around 50%. The part of rebound explained by Direct rebound effect is around 10%. Indirect rebound effect shows values between 1.2% and 1.8%. Finally, Economic wide rebound effect varies from −4.51% to around 40% but without showing a clear trend for the period considered. The novelty of this study is that it attempts to break the overall rebound effect down to the direct, indirect, and economic wide rebound effect by combining the Cobb-Douglas production function and decomposition techniques.