The Rebound Effect of Material and Energy Efficiency and Their Determinants : Insights from the Stochastic Frontier Analysis for the EU and its Major Trading Partners

This study presents a comprehensive analysis and comparison of material and energy efficiency performances and their rebound effects, providing insights into their implications for sustainability and climate change policies. Using Stochastic Frontier Analysis (SFA), we examine material and energy efficiency scores and rebound effects in the European Union (EU) member countries and their major trading partners from 1995 to 2019. Our findings reveal several key insights. Firstly, developed EU countries and affluent trading partners exhibit higher material and energy efficiency scores, while less developed members and partners rank lower. The study highlights the potential implications of the EU's Carbon Border Adjustment Mechanism (CBAM) for low-efficiency trading partners, which may face substantial penalties and incentivize significant measures to enhance material and energy efficiency. Secondly, a positive correlation is observed between efficiency improvements and rebound effects, suggesting that policymakers should take rebound issue seriously. Thirdly, while energy efficiency scores are relatively higher, material efficiency performances are lower and improving over the years. Finally, the rebound effects of energy efficiency exceed those of material efficiency, implying that energy reduction potentials are largely offset. Therefore, prioritizing material consumption for environmental sustainability becomes crucial due to significant potential for improvement with lower rebound effects