An Intertemporal Optimisation Model of Households in an E3-Model (Economy/Energy/Environment) Framework

This paper deals with the total CO2 impact of households in a simple dynamic E3 model (economy/energy/environment), comprising a model block of private consumption and an input-output model. The consumption model describes the demand for different durables and nondurables, derived from intertemporal optimisation and has been estimated econometrically with Austrian time series data. Energy demand of households in addition to economic variables also depends on the energy-efficiency as well as the level of energy-using durables (electrical and non-electrical appliances, vehicles, video, audio, computer goods). Higher energy-efficiency also leads to the well known "rebound effect", as the "service" of energy becomes cheaper. Investment in new and potentially more energy-efficient durables is guided by intertemporal optimisation. Policies with incentives to switch towards a more energy-efficient durable stock have an impact on energy consumption, as well as on the demand for other nondurables and – due to the investment – on durables and therefore cause multiple effects on energy demand and emissions. Indirect energy demand and CO2 emissions of production for households is also taken into account. An exemplary simulation of a scrappage policy scheme for private cars reveals that – though the direct "rebound effect" lies within the range found in the literature – the direct and indirect feedback mechanisms on energy demand of the total economy might be completely different.