This Working Paper forms part of the TPA’s assessment of evidence for a rebound effect from improved energy efficiency.

Technical Report 3 focuses upon empirical estimates of the elasticity of substitution between energy and capital. This parameter has been identified as a key determinant of the likely magnitude of the rebound effect in different sectors. The report clarifies the meaning and importance of this parameter, summarises and compares empirical estimates of this parameter, evaluates the reasons that have been proposed for the differing results, discusses whether a consensus has been reached to whether energy and capital can be considered as ‘substitutes’ or ‘complements’ and draws some implications for the rebound effect.