ENERGY PRICES AND ENERGY EFFICIENCY POLICIES: THE ROLE OF PRICE ELASTICITY AND THE REBOUND EFFECT.

Energy efficiency has been promoted in the last two decades in Latin America and the Caribbean (LAC) but recently it has gain ground as a mitigation strategy for climate change in order to achieve the commitments assumed in the National Determined Contributions (NDCs) of the Paris Agreement. The promotion of energy efficiency includes a wide range of policy instruments from economic incentives to regulatory and information approaches. Among the economic instruments the determination of energy prices is a central topic in energy efficiency discussion. Governments are interested in applying a price scheme to generate incentives to reduce energy consumption. In order to achieve this, first an analysis of the demand is required. In particular policy makers have to study how the demand responds to price incentives, in other words, price elasticity of energy demand is necessary to orientate energy efficiency actions. In this context, the objective of this paper is to perform a meta-analysis of the coefficient of price elasticity of electricity demand in the residential sector of LAC region and to discuss the results in terms of energy efficiency policies, taking into consideration the role of the rebound effect. This effect consists in reinvesting the financial saving from lower energy bills to access more energy services rather than to reduce energy demand. Another aim of this paper is to discuss the rebound effect in developing regions, as the economic context and the behavior of consumers may be different from developed regions. Findings show that residential electricity demand is inelastic (-0.252) in LAC region. Considering only this aspect, public policies aiming to increase energy prices, in order to improve energy efficiency, would not be effective. However, they are an adequate strategy to avoid the rebound effect. Finally, whether this effect should be avoided or incentivized depends on the definition of energy efficiency policy and on the stage of economic development of the country under study. [ABSTRACT FROM AUTHOR]