Standard economic theory regards capital and labour as the main factors of production that satisfy the “cost-share theorem”. This paper argues that when a third factor, namely energy, is added physical constraints on substitution among the factors arise. We show that energy is a much more...

Energy conservation is widely accepted as an important strategy to combat climate change. It can, nevertheless, stimulate new energy uses that partly offset the original savings. This is known as rebound. One particular rebound mechanism is re-spending of money savings associated with energy...