A System Dynamics Approach to the Rebound Effect: Policy Volatility and Energy Justice in Emerging Economies

• Authors: Gerardo Blanco, Emilio Padilla Rosa, Martín Bordón-Lesme and Jaume Freire González.
• BSE Working Paper: 1499 | July 25
• Keywords: Rebound effect , emerging economies , energy justice , energy affordability , system dynamics modeling , Time-varying policy
• JEL codes: Q41, Q48, H23, C61

Energy efficiency is critical for decarbonization, yet its benefits are often undermined by the rebound effect, particularly in emerging economies where pent-up demand is high. Traditional static models fail to capture the temporal dynamics, behavioral feedbacks, and systemic instabilities that shape policy outcomes. This study addresses these gaps by developing a novel system dynamics model to serve as a ’policy sandbox.’ We analyze the dynamic consequences of policy interventions, moving beyond conventional metrics to assess household welfare trajectories. Our findings reveal that while isolated efficiency gains can backfire, conventional corrective taxes, when interacting with realistic household financial behaviors, can engineer a devastating energy poverty trap—a state where vulnerable households pay more for a reduced level of essential energy service. This research unmasks a fundamental tension not just between sustainability and equity, but between a policy’s intended equilibrium and the survivability of its transient path. We provide a robust analytical tool for designing adaptive, justice-centered policies capable of navigating this complex landscape and avoiding the most severe, unintended consequences of the energy transition.