Fuel conserving (and using) production functions ☆ Harry D. Saunders ⁎ Managing Director, Decision Processes Incorporated, 2308 Saddleback Drive, Danville, CA 94506 Received 6 July 2006; received in revised form 14 November 2007; accepted 26 November 2007 Available online 5 December 2007 Abstract This article compares eight production/cost functions used or potentially useful for exploring how energy efficiency gains affect energy consumption. We show the practitioner's choice of function can inadvertently pre-determine results, and make recommendations as to which functions are flexible enough to prevent this. We also show pre-selected factor substitution elasticities can similarly pre-determine results. To aid the comparison we decompose the energy consumption “rebound” effect into intensity and output/ income effects, which also delivers insight into the mechanisms of rebound. We conclude by recommending practitioners restrict themselves to either the Gallant (Fourier) or the Generalized Leontief/Symmetric Generalized Barnett cost functions as being sufficiently “rebound flexible.” The Translog cost function may be suitable given certain conditions and a particular form of the CES (Solow) function is a possible, but problematic, candidate. Along the way, the article provides a general methodology for similarly examining any arbitrarily-defined constant returns to scale production or cost function. © 2007 Elsevier B.V. All rights reserved. Keywords: Energy efficiency; Fuel efficiency; Rebound; Rebound flexible; Production function; Cost function; Translog; Generalized Barnett; Generalized McFadden; Gallant; Fourier; Generalized Leontief; Cobb–Douglas; CES; Leontief; Conservation; Global warming 1. Introduction Energy analysts wishing to explore the relationship between engineering efficiency gains and energy use at a sectoral or macro level almost always rely on some specification of a production function (or its dual cost function). Available online at www.sciencedirect.com Energy Economics 30 (2008) 2184 – 2235 www.elsevier.com/locate/eneco ☆ This article is dedicated to the memory of Alan Manne, who died September 27, 2005. ⁎ Tel.: +1 925 743 8400. E-mail address: hsaunders@decisionprocessesinc.com. 0140-9883/$ - see front matter © 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.eneco.2007.11.006