The direct rebound effect for two income groups: The case of Paraguay

• Authors: Jaume Freire González.
• Development Economics
• Environmental Economics
• Energy for Sustainable Development

We estimate the direct rebound effect (DRE) for all energy services requiring electricity for their provision in Paraguayan households. Using recent panel data from 2001 to 2017, we estimate the magnitude of the DRE at the province and municipality levels. Because we estimate the DRE through the own-price elasticity of electricity demand, we not only provide the first empirical evidence of the DRE for Paraguay, a developing country, but also update the study of Paraguay’s residential electricity demand. Our findings suggest a positive DRE emerges after an improvement in energy efficiency, but the magnitude of the DRE does not completely reduce the resulting energy savings. We find a lower DRE in low-income households, which may be explained by two factors: electricity is not the main source of energy for most low-income households, and most clandestine electricity connections are from low-income households. Paraguay is one of the countries with the highest generation of electricity per capita through hydroelectric plants. However, this electricity supply does not match electricity consumption, especially in low-income households, because of distribution issues in relation to energy sources. We derive from our findings some policy measures to improve the situation.