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The Rebound Effect and Energy Efficiency Policy
http://www.rff.org/RFF/Documents/RFF-DP-14-39.pdf[font face=Serif]November 2014 ◼︎ RFF DP 14-39
[font size=5]The Rebound Effect and Energy Efficiency Policy[/font]
Kenneth Gillingham, David Rapson, and Gernot Wagner
1616 P St. NW
Washington, DC 20036
202-328-5000 www.rff.org
[font size=4]Abstract[/font]
[font size=3]What do we know about the size of the rebound effect? Should we believe claims that energy efficiency improvements lead to an increase in energy use? This paper clarifies what the rebound effect is, and provides a guide for economists and policymakers interested in its magnitude. We describe how some papers in the literature consider the rebound effect from a costless exogenous increase in energy efficiency, while others examine the effects of a particular energy efficiency policy—a distinction that leads to very different welfare and policy implications. We present the most reliable evidence available quantifying the energy efficiency rebound, and discuss areas where estimation is extraordinarily difficult. Along these lines, we offer a new way of thinking about the macroeconomic rebound effect. Overall, the existing research provides little support for the so-called “backfire” hypothesis. Still, much remains to be understood, particularly relating to induced innovation and productivity growth.
Key Words: energy efficiency, rebound effect, take-back effect, backfire, Jevons Paradox
…
[font size=4]Introduction[/font]
…
When we consider the total rebound effect, and especially effects that may occur at the macroeconomic level, reliable empirical estimates are much harder to come by. We review estimates in the literature, where available, and provide a conceptual discussion to help contextualize the existing estimates and provide intuition into magnitudes where empirical evidence is scarce. Our review of the literature leads us to conclude that a continued focus within policy debates on backfire is largely unwarranted, and distracts from the issue of utmost importance: evaluating the economic efficiency of energy efficiency policies. The rebound effect is just one component of this more important analysis. Moreover, the rebound effect usually improves economic efficiency, so policies aimed at mitigating the rebound effect, as have been discussed in the literature (e.g., van den Bergh (2011)) and policy community (e.g., Gloger (2011)), are likely counterproductive from a welfare perspective. However, in assessing the potential for backfire, path dependency in innovation is a ‘wild card.’ Despite decades of research on the rebound effect, there is still much to be learned, and we point to several high- potential avenues.
The paper is structured as follows. We first define the different components of the rebound effect. We then briefly summarize quantitative evidence on the different channels of rebound effect, and discuss challenges to identifying causal rebound effects in each. Finally, we conclude with implications for energy efficiency policy. Along the way, we point out popular misconceptions of about the rebound and how to address them.
…[/font][/font]
[font size=5]The Rebound Effect and Energy Efficiency Policy[/font]
Kenneth Gillingham, David Rapson, and Gernot Wagner
1616 P St. NW
Washington, DC 20036
202-328-5000 www.rff.org
[font size=4]Abstract[/font]
[font size=3]What do we know about the size of the rebound effect? Should we believe claims that energy efficiency improvements lead to an increase in energy use? This paper clarifies what the rebound effect is, and provides a guide for economists and policymakers interested in its magnitude. We describe how some papers in the literature consider the rebound effect from a costless exogenous increase in energy efficiency, while others examine the effects of a particular energy efficiency policy—a distinction that leads to very different welfare and policy implications. We present the most reliable evidence available quantifying the energy efficiency rebound, and discuss areas where estimation is extraordinarily difficult. Along these lines, we offer a new way of thinking about the macroeconomic rebound effect. Overall, the existing research provides little support for the so-called “backfire” hypothesis. Still, much remains to be understood, particularly relating to induced innovation and productivity growth.
Key Words: energy efficiency, rebound effect, take-back effect, backfire, Jevons Paradox
…
[font size=4]Introduction[/font]
…
When we consider the total rebound effect, and especially effects that may occur at the macroeconomic level, reliable empirical estimates are much harder to come by. We review estimates in the literature, where available, and provide a conceptual discussion to help contextualize the existing estimates and provide intuition into magnitudes where empirical evidence is scarce. Our review of the literature leads us to conclude that a continued focus within policy debates on backfire is largely unwarranted, and distracts from the issue of utmost importance: evaluating the economic efficiency of energy efficiency policies. The rebound effect is just one component of this more important analysis. Moreover, the rebound effect usually improves economic efficiency, so policies aimed at mitigating the rebound effect, as have been discussed in the literature (e.g., van den Bergh (2011)) and policy community (e.g., Gloger (2011)), are likely counterproductive from a welfare perspective. However, in assessing the potential for backfire, path dependency in innovation is a ‘wild card.’ Despite decades of research on the rebound effect, there is still much to be learned, and we point to several high- potential avenues.
The paper is structured as follows. We first define the different components of the rebound effect. We then briefly summarize quantitative evidence on the different channels of rebound effect, and discuss challenges to identifying causal rebound effects in each. Finally, we conclude with implications for energy efficiency policy. Along the way, we point out popular misconceptions of about the rebound and how to address them.
…[/font][/font]