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Energy Efficiency and Energy Use: The Rebound Effect is Overplayed

Energy Efficiency and Energy Use: The Rebound Effect is Overplayed thumbnail

Trying to put the rebound effect for energy efficiency in its rightful place is like playing a game of wack-a-mole. Predictably every couple of years, someone new discovers the counter-intuitive appeal of showing how more efficient energy policies may lead to more energy use. Wham! Told you there’s something wrong with those clean-car standards. Well, not so fast.

Yes, the rebound effect is real. But it’s also small. And what’s there is actually positive! Why shouldn’t people who can now afford to due to more efficient energy technologies be able to improve theirs lives?

Together with three co-authors (Ken Gillingham at Yale, Dave Rapson at University of California, Davis, and Matt Kotchen, currently on leave from Yale to serve as Deputy Assistant Secretary for Environment and Energy at the U.S. Treasury), I surveyed a bajillion+1 energy efficiency rebound studies. Nature then made us cut down those references to 6. We settled at 9.

We couldn’t find a single study that has the rebound be above 100% or anything close to it, what’s necessary to nix energy efficiency savings. The maximum number you can get is 60%, and that’s already quite a stretch. Think 30% as the upper bound for actual behavioral responses. Yes, we are more efficient today than we were a hundred years ago, and we also use more energy today. But that’s far from talking about the rebound effect. It’s simply economic growth.

Establishing a causal link between efficiency and energy use isn’t quite as simple. In the end, the rebound effect comes in four forms. Buy a more fuel-efficient car, and driving that next mile just became cheaper. The result: a bit more driving, to the tune of 5 to a maximum of 30%, although most likely much closer to 5-10% of the initial fuel savings. Then there’s the indirect effect: Drivers may now use some of the savings to buy other products that consume energy.

You can already see that we can’t just add these two effects. If you spend some of the gas money on driving more, you have less to spend on that plane ticket, and vice versa.

Then there are two macroeconomic effects: one via the price and one via technological advances. They are the trickiest to pin down and could, in theory, be the largest. But theory lends a helping hand in getting an upper bound: the basic demand-and-supply relationship tells us that the macroeconomic price effect can’t be more than 100%.

And once again, all these effects aren’t anywhere near that threshold. 60% is as high as it gets for the combined effect, and only in rare circumstances. For the most part, it’s much closer to 5 to perhaps 30%.

So where does that leave us?

When designing energy efficiency policies like clean-car standards, consider the rebound effect, much like the government already does. The Department of Energy’s model uses a highly appropriate 10% rebound figure for the car standards. And that’s about it. Not much else to see here.

If you did want to take it a step further — full disclosure: a step I couldn’t convince my three co-authors to take in the Nature piece itself — everything else equal, the existence of the rebound effect may prompt us to use even stricter energy efficiency standards. If you have an overall target in mind, and the rebound effect shaves off a bit, you ought to consider using a slightly stricter target to get back to where you wanted to be.

For more, check out the full Nature piece. Well worth the $32 to put the rebound effect in its rightful place once and for all.

10 Comments on "Energy Efficiency and Energy Use: The Rebound Effect is Overplayed"

  1. GregT on Thu, 24th Jan 2013 4:15 pm 

    This has been well understood for a very long time, and is known as “Jevon’s Paradox”.

    Fuel efficiencies result in more fuel consumed.

  2. DC on Thu, 24th Jan 2013 4:22 pm 

    Where to start with this hack piece. First of all, he starts with a straw-man, 100% rebound effect. Even I have never heard anyone claim anything near that high. Its not impossible for such a thing to occur, but Ive never seen a serious study ever suggests rebound rates that high. Of course, he knocks his own ridiculous claim down easily. Then he goes to say hes looked at a “bajillion+1 energy ” studies.

    Cleary the guy is a bit of a clown. But his real goal is not to promote energy or resource efficiency here, its to promote the idea that constant economic\physical growth of the economy is not only possible(thanks to ‘efficiency no less), but desirable.

    He completely omits what many real researchers on this issue long ago concluded.

    Growth in population and resource utilisation is in every single field and case, outstripping the extremely modest efficiency improvements our corporate leaders dole out to us.

    Even if the rebound effect were 100% false(of course its very real), it wouldn’t matter one bit. Growing populations would still nullify any improvements the corporate powers grudgingly allowed into the market. The rebound effect just make things worse. Its very revealing that in the United of Wall-Mart for example, the only thing pushing DOWN demand, is demand destruction. ‘Efficiently’ gains are so small down there as be un-measurable. All the heavy lifting is being done by high(er) energy prices and demand destruction as the shop\drive\consume economy of North America continues its slo-mo withering.

    But this dude mentions none of this does he…

  3. DC on Thu, 24th Jan 2013 4:37 pm 

    No Greg, sorry they dont. What drives fuel consumption is largely economic. IE price. People barely respond to efficiency signals at all, they respond to price signals much more readily.

    Our corporate leaders understand this all too well. Its why the govt is run on the advice of economists, and not scientists. Economists drive policy that is purely ‘cost’ in dollar terms, driven.

    Why do you think US policy for most of this century has been to subsidize both the production AND consumption of fossil-fuels? Neither the production of fossil, or US vehicles were remotely ‘efficient’ no matter how you measure it, yet population growth kept expanding the consumption of fuels relentlessly. Or why they garrison the planet to keep fuel cheap for obese amerikans that commute 60 miles a day from distant suburbs to un-important jobs in distant crumbling city centers?

    If Jevons paradox supposedly accounts for more fuel usage(which is manifestly does not), then how do you account for the explosive growth of extremely IN-efficient SUV ownership? The only thing that inhibited there growth was the financial meltdown. Its even more interesting, that the oil-auto cartel has been trying so very hard to revive SUV sales even in the face of an economic contraction.

    Nor have so-called ‘hybrids’ resulted in more fuel consumed, because there so few of them, and the economy is stagnant anyhow-so how could ‘hybrids’ or any other higher mpg trash-bin make people want to drive more anyhow? Are they building new roads for all the ‘high-efficeny’ garbage bins to drive to newly built Wall-marts on? Not really, there all stuck in the same saturated road networks wasting fuel like there LOW mpg SUV brethren.

  4. autonomous on Thu, 24th Jan 2013 8:54 pm 

    Efficiency measures actually save some energy but it depends on how it is applied.
    Jevons Paradox is more likely to hold when the energy efficiency measure is applied to an industrial use and less likely to hold when the efficiency measure is applied to an end use, such as insulation for homes.

    For instance, California has kept per capita electricity use the same for the last 30 years, despite the proliferation of gadgets, heated swimming pools and air conditioners, among other modern conveniences. In fact, energy efficiency is a much better way of meeting growing demand for power than building a new power plant—as the U.S. economy has grown, efficiency has kept energy use from rising anywhere near as fast. And efficiency can help combat climate change.

  5. GregT on Thu, 24th Jan 2013 11:21 pm 

    Jevons paradox
    From Wikipedia, the free encyclopedia

    In economics, the Jevons paradox is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.[1] In 1865, the English economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal use led to increased consumption of coal in a wide range of industries. He argued that, contrary to common intuition, technological improvements could not be relied upon to reduce fuel consumption.[2]
    The issue has been re-examined by modern economists studying consumption rebound effects from improved energy efficiency. In addition to reducing the amount needed for a given use, improved efficiency lowers the relative cost of using a resource, which tends to increase the quantity of the resource demanded, potentially counteracting any savings from increased efficiency. Additionally, increased efficiency accelerates economic growth, further increasing the demand for resources. The Jevons paradox occurs when the effect from increased demand predominates, causing resource use to increase.[2]

  6. autonomous on Fri, 25th Jan 2013 12:59 am 

    Jevons paradox
    From Wikipedia:

    Several points have been raised against this argument. First, in the context of a mature market such as for oil in developed countries, the direct rebound effect is usually small, and so increased fuel efficiency usually reduces resource use, other conditions remaining constant.[6][9][10] Second, even if increased efficiency does not reduce the total amount of fuel used, there remain other benefits associated with improved efficiency. For example, increased fuel efficiency may mitigate the price increases, shortages and disruptions in the global economy associated with peak oil.

  7. BillT on Fri, 25th Jan 2013 1:40 am 

    Wiki is not the most reliable resource to quote. It reflects the spin of the majority thinking.

    The bottom line is that all energy sources are declining and all costs are increasing. That is the new ‘normal’. Adjust to a world where you will be buying/using less and less of everything for the rest of your life. Eventually you will be down to necessities. Think 3rd world.

  8. autonomous on Fri, 25th Jan 2013 2:00 am 

    Almost everything dealing with depleting reserves of oil and gas relies heavily on a dogmatic rendering of Jevons’ views about depleting supplies of coal in his day and a misreading of Jeavons’ famous “paradox” that is pure misinformation. Fundamentally, the accounting trick that makes this “paradox” seem more real than it actually is involves an arithmetic sleight-of-hand. Any associated lowering of unit costs of production (an increase in economic efficiency) will manifest only in specific industries or sectors where production became more concentrated as a result of the previous crisis clearing weaker economic players away, or otherwise severely marginalizing them in the market. Jevons’ method proceeds according to a fallacious assumption that what is true for any one sector will be true for all, just as whatever is true for one consumer will be true for consumption in general and society as a whole.

  9. GregT on Fri, 25th Jan 2013 5:39 am 


    “Several points have been raised against this argument. First, in the context of a mature market such as for oil in developed countries, the direct rebound effect is usually small, and so INCREASED FUEL EFFICIENCY USUALLY REDUCES RESOURCE USE, other conditions remaining constant.[6][9][10] Second, EVEN IF INCREASED EFFICIENCY DOES NOT REDUCE THE TOTAL AMOUNT OF FUEL USED, there remain other benefits associated with improved efficiency. For example, increased fuel efficiency may mitigate the price increases, shortages and disruptions in the global economy associated with peak oil.”

    So this argument has has both bases covered. Hardly making a case one way or the other.

  10. GregT on Fri, 25th Jan 2013 5:56 am 

    I might add,

    This appears to me to be akin to the “Fight of the Century”, “Economics vs the Environment”, “Human Beings vs Mother Nature”.

    I know where I’m placing my bet.

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