AbstractIn this paper we propose a macroeconomic model where energy intensity at the macro level responds to changes in energy prices and technological innovations. In our theory this response depends on the interaction between the energy eﬃciency built in capital goods and the growth rate of Investment Speciﬁc Technological Change. ISTC reduces the cost to produce investment goods (extensive margin) and renders them more productive (intensive margin). Higher ISTC acts as an energy saving device. If energy prices stay constant, a permanent increase in the growth rate of ISTC may rise energy intensity in the long run, producing a rebound eﬀect. This is so because the combination of higher ISTC growth rate and constant energy prices makes agents to choose less energy eﬃcient capital goods. Our theory can be used to test when and how we should see a rebound eﬀect in energy use at the aggregate level and can be used to test the aggregate eﬀect of any policy aiming to reduce energy use.