The Rebound Effect: Some Questions Answered

Abstract

Greenhouse gas (and other pollutant) emissions from energy use are now taken to be a problem both internationally and for individual national and regional governments. A number of mechanisms are being employed to reduce energy consumption demand as part of climate and energy policies internationally. A central policy focus is increased efficiency in the use of energy. However, the straightforward link between increased energy efficiency and reduced energy consumption has been questioned. This is due to the notion of the ‘rebound effect’. Rebound occurs when improvements in energy efficiency actually stimulate the direct and indirect demand for energy in production and/or consumption. It is triggered by the fact that an increase in the efficiency in the use of energy acts to reduce the implicit price of energy, or the price of effective energy services for each physical unit of energy used. Thus, it is an economic phenomenon. The rebound effect implies that measures taken to reduce energy use might lead to increases in carbon emissions, or at least not offset them to the extent anticipated. It is possible to distiguish between direct rebound effects in energy consumption in the activity where energy efficiency has increased, indirect rebound effects from income and substitutuion effects and economy-wide rebound effects (impacts on macro-level energy use). This paper attempts to provide a non-technical overview of work on the latter, carried out under an ESRC-funded project investigating the source and magnitude of econom-wide rebound effects from increased energy efficiency in the UK.General equilibrium, energy efficiency, rebound effects, disinvestment.