Clean Energy Equivalent of 4 to 19 Australias Required to Meet Gap Created by Rebound
A new International Energy Agency report finally acknowledges the major role that efficiency rebound effects will play in future energy demand, and a Breakthrough analysis finds that the consequences are significant. Rather than their previous estimate of global rebound at 9 percent, the IEA report concludes that efficiency rebound can reach as high as 60 percent. Rebound effects at this level will have significant implications for global climate mitigation efforts, requiring as much as 13 percent more clean energy supply by 2035 to meet higher global energy demand – equivalent to the total energy consumption of 19 Australias. Rebound effects are generally neither a negative impact of efficiency nor a reason to not pursue energy efficiency improvements. But clear accounting for rebound is absolutely essential for future projections of energy use.
A reversal in the International Energy Agency’s views on energy efficiency suggests that as much as 2,176 million tons of oil equivalent worth of extra clean energy consumption will be required by 2035 to meet the organization’s aggressive climate targets. That’s the equivalent of 19 Australias’ energy consumption. This finding is the result of a Breakthrough analysis of a new IEA report, which showcased a new position for the agency on what energy experts call “rebound effects” – a hotly contested phenomenon in energy consumption growth.
Rebound effects emerge when increased energy efficiency improves the performance or lowers the cost of energy services, leading to consumer “re-spending,” investment effects, and macroeconomic rebounds in energy consumption in response to lower energy prices. As the IEA writes, “correct accounting for the rebound effect may reduce the potential contribution of energy efficiency to climate change mitigation, possibly altering the relative priority of different CO2 abatement policies.”
The new report marks a major institutional leap forward for the IEA, which until last month had downplayed rebound effects both quantitatively and discursively. IEA publications – including their regular and widely read World Energy Outlook and Energy Technologies Perspective – have long emphasized the leading role that energy efficiency can play in reducing global carbon emissions, contributing “about 40% of the CO2 abatement needed by 2050” according to the new report. But such claims were made with the support of modeling that assumed rebound effects totaling only 9 percent on average (WEO 2012, page 316), far below levels identified by the academic consensus – a consensus that now includes the IEA itself.
The new report – titled “Capturing the Multiple Benefits of Energy Efficiency” – concludes that efficiency rebounds can and do reach at least as high as 60%, with rebound in developing countries likely much higher than in rich countries. This is consistent with literature reviews published by the Breakthrough Institute, the European Commission, the UK Energy Research Center, and other leading energy research institutions and experts.
But while the new report converges with the academic consensus on rebound effects, that consensus has yet to infiltrate IEA’s modeling. In the following analysis, we see that the implications of IEA’s reversal are highly significant for their own modeled energy consumption projections.
In the IEA’s baseline “Current Policies” Scenario, total primary energy demand (TPED) increases from 12,370 million tonnes of oil equivalent (Mtoe) in 2010 to 18,676 Mtoe in 2035. In their “450” Scenario, TPED only increases to 14,793 Mtoe, a 3,831 Mtoe or 61% decrease in demand below BAU.
But this projection still relies on old IEA assumptions of 9% rebound, assumptions that IEA itself now acknowledges are inappropriate. What happens when more appropriate assumptions are used? To comport IEA’s new estimates of rebound effects with their modeling, we can plug a more representative range of rebound effects into IEA energy consumption projections. If globally averaged rebound effects are limited to 20%, then 2035 TPED reaches 15,220 Mtoe in 2035. This is 469 Mtoe higher than the base 450 Scenario conclusion, or a difference approximately equal to 4 Australias’ worth of energy consumption. If global rebounds are 60%, 2035 TPED is 16,773 Mtoe, or 2,176 Mtoe greater than the base 450 Scenario. That’s the same energy consumption as 19 Australias, or approximately the consumption of the entire EU-15, plus Russia.
Furthermore, it’s likely that realized rebound effects will be at the high end of this 20-60% range, since most of the modeled demand reductions in the WEO 450 Scenario come from the developing world. Of the 3,883 Mtoe demand reduction achieved below business-as-usual by 2035, 3,006 Mtoe come from non-OECD countries. That’s 77% of the demand reduction. Rebound effects in the developing world, especially at the national or economy-wide level, have garnered relatively less study than sectors like final energy demand in rich countries. But there’s a virtually unanimous consensus in the literature that rebound is likely to be significantly higher in emerging economies, where demand is far from saturated and efficiency improvements make energy cheaper and more useful for accelerated industrialization and economic growth.
The new report should be applauded for its efforts to include both quantitative and qualitative discussion of rebound effects. As the report notes, rebound effects are generally neither a negative impact of efficiency nor a reason not to pursue energy efficiency improvements. But accounting for rebound is absolutely essential for future projections of energy use, especially when those projections are used by governments for use in energy and climate policy making.
The IEA report includes a comprehensive and nuanced discussion of rebound in its various contexts, including direct, indirect, and macroeconomic rebound effects. Citing respected literature reviews by the UK Energy Research Center (UKERC), the European Commission, and the Breakthrough Institute, IEA observe that direct rebounds in rich countries can range from 0% to 65%, and “tend to converge between 10% and 35%.” In their discussion of national-level and macroeconomic rebound effects, the report cites work by Barker et al (2009) using IEA modeling data that finds global average economy-wide rebound effects will reach approximately 31% by 2020 and 52% by 2030. As the report notes, it is likely that this global average will be balanced by relatively lower rebounds in rich, demand-saturated countries and relatively higher rebounds in industrializing poor and middle-income countries.
The institutional progress on display at the IEA follows a similar evolution at the Intergovernmental Panel on Climate Change (IPCC), which in the spring of this year included a substantial discussion of rebound effects in their Fifth Assessment Report. In AR5, the IPCC wrote that “rebound effects, particularly in emerging economies, mean consumers and firms are using energy efficiency to enhance economic welfare, getting more energy services out of the same or less overall energy use. That’s fundamentally a good thing.” The IPCC review reported a range of rebound effects between 20 and 60 percent, the same as another literature review published in Nature last year by Kenneth Gillingham and coauthors.
As the IEA report correctly observes, there remains much work to be done in incorporating rebound effects into long-term projections of national and global energy demand. In particular, modeling efforts should aim for highly disaggregated estimates of rebound effects, from end-use consumption to economy-wide effects at various levels of development. Models must also consider the dynamic relationship between different types of rebound responses – take-back effects, spending effects, investment effects, macroeconomic price responses, etc. – and other energy and climate policies, including emissions pricing.
Davy on Tue, 7th Oct 2014 10:13 am
This report is continuation of top down reporting projecting increases far into the future. Reality indicates limits of growth and diminishing returns to our dynamic system argues for a significant break in growth in population and consumption. If the oil age is nearing its terminal decline how can population and energy consumption continue to grow exponentially? This report and the population report discussed on this PO board today both have wild projections into the future. Is it possible these reports seek to show feel good number with enough alarm so people will feel we have a problem but not enough negative reality to question BAU’s continuation far off into the future? I wonder do the data wonks at these agencies talk around the water coolers about what is really going on? These guys are not idiots surely they are questioning the formulas and the basic data inputs.
“Hey Jim, the parameters I believe that are correct are yielding a serious decline in 10 years. Yea, Tim, I see that too but Ralf upstairs said use the T1 beta variables instead. He said we are not goal seeking those parameter results we see in this report.”
Kenz300 on Tue, 7th Oct 2014 11:22 am
The fossil fuel industry is doing all they can to try to keep doing business as usual. Rising prices for fossil fuels and damaging environmental effects are having an impact on demand. Climate Change is real. We need to speed up the transition to alternative energy sources.
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New Cost Analysis Shows Unsubsidized Renewables Increasingly Rival Fossil Fuels « Breaking Energy – Energy industry news, analysis, and commentary
http://breakingenergy.com/2014/09/25/new-cost-analysis-shows-unsubsidized-renewables-increasingly-rival-fossil-fuels/
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Fossil Fuel Divestment Movement Continues To Grow
http://www.huffingtonpost.com/2014/09/22/fossil-fuel-divestment_n_5861906.html?utm_hp_ref=climate-change
shortonoil on Tue, 7th Oct 2014 1:21 pm
“Scenario, total primary energy demand (TPED) increases from 12,370 million tonnes of oil equivalent (Mtoe) in 2010 to 18,676 Mtoe in 2035.”
The EIA can not get it through their politically geared, bureaucratic mind that by 2035 the oil age will have ended. The average barrel of crude will be providing no more energy than a barrel of buffalo chips. If by some miracle, the globally integrated production system that is necessary to provide the goods and services needed for oil production, has not collapsed production will be no more than 20 mb/d. Instead of focusing on our present dilemma, the EIA is flitering away its time on Rebound Effects. Fiddling while Rome burns. As Mark Twain said, “history does not necessarily repeat itself, but it does rhythm”.
http://www.thehillsgroup.org/
Northwest Resident on Tue, 7th Oct 2014 1:33 pm
“If by some miracle the globally integrated production system that is necessary to provide the goods and services needed for oil production has not collapsed (by 2035), production will be no more than 20 mb/d.”
Nothing that a few hundred trillion dollars in additional QE and global debt can’t compensate for.
By that time, stock prices for my 7-year-old nephew’s incorporated and publicly owned lemonaide stand will be around $1000 per share.
(sarc off)
J-Gav on Tue, 7th Oct 2014 2:20 pm
Short – Just like so many article-writers on population can’t get it that there will never be 11 billion humans on this planet …
I’ll add this from French writer Jean Baudrillard to accompany the Twain quote: “History may repeat itself, but it tends to stutter.”
andya on Tue, 7th Oct 2014 3:03 pm
Humans have been increasing efficiency since the first coal powered engine. This has never reduced consumption.
What these forcasts show is that energy consumption keeps on growing. Good luck with that.