The rebound effect: the ACEEE strikes back

Michael Giberson

The significance of the “rebound effect”  remains a matter of some debate. (The rebound effect is the frequently observed tendency for energy efficiency improvements to increase consumer use of the now more efficient good or service).

Recently the Institute for Energy Research published Robert Michaels’s survey of rebound effects. In the study, Michaels concluded:

Properly accounting for the impact of rebounds is essential to obtaining an accurate picture of how the efficiency policy in question may impact consumption levels, and will also better inform the cost-savings estimates associated with decreasing consumption.  Improving the accuracy of cost-savings estimates will allow policymakers to better evaluate whether the benefits of energy efficiency programs outweigh the problems associated with limiting the choices available to consumers.

This would be a matter of mere technical interest among energy policy economists but for conservation advocates who have seized onto engineering efficiency regulation as a key public policy tool to promote resource conservation. One such group of conservation advocates, the American Council for an Energy Efficient Economy, has produced its own survey of the efficiency and rebound literature. In announcing the study, ACEEE said:

… we found that there are both direct and indirect rebound effects, but these tend to be modest. Direct rebound effects are generally 10% or less. Indirect rebound effects are less well understood but the best available estimate is somewhere around 11%. These two types of rebound can be combined to estimate total rebound of about 20%. We examined claims of “backfire” (100% rebound), but they do not stand up to scrutiny. Furthermore, direct rebound effects can potentially be reduced through improved approaches to inform consumers about their energy use in ways that might influence their behavior. And indirect rebound effects, which appear to be linked to the share of our economy that goes to energy, may decline as the energy intensity of our economy decreases.

Efficiency policy often gets treated as a “win win win” type of policy, which accounts for some of its popularity as a conservation tool. The public gets a reduction in any externalities associated with the production and consumption of the resource, more resources are left in the ground for future generations, and the consumers get more bang for their resource buck. Rebound effects cut into the first two effects, and whether consumers actually get more bang for their buck depends on the cost of the efficiency improvements and the degree to which consumers prefer to save some money now over more money later. The reason efficiency policy advocates want to push back against rebound is that recognizing even modest rebound effects can substantially tilt cost-benefit analysis against energy efficiency policies.

As mentioned in prior posts on rebound effects, the Breakthrough Institute and the Rocky Mountain Institute have dueled on the issue as well.

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3 thoughts on “The rebound effect: the ACEEE strikes back

  1. The “rebound effect”, or Jevons’ Paradox, should not be expected to occur in all cases in which a more efficient device replaces a less efficient device. For example, if I keep my home at 72F year round, because that is the temperature at which I am most comfortable, there is vanishingly little likelihood that I would change my thermostat settings to some other temperatures after installing a more efficient furnace/AC or heat pump. However, if I were still setting my thermostat at 66F during the winter (and wearing my Jimmy Carter cardigan) and 78F during the summer, even though I was only marginally comfortable at those temperatures, I might be very likely to change the thermostat to more comfortable temperatures after installing a more efficient HVAC system.

    Similarly, if I have been limiting my driving because of high fuel prices, I might be more likely to increase my driving after purchasing a more fuel efficient vehicle. However, if I have been limiting my driving because I have good public transportation available and convenient, I would be less likely to start driving more after purchasing a more efficient vehicle.

    I would contend that the “rebound effect”, or Jevons’ Paradox, is likely to be greatest when conservation has been being practiced with regard to a particular end use. Paradoxically, in these cases, energy efficiency offsets conservation. However, in all cases, energy efficiency is more durable than energy conservation.

    Predicting how a large population of very complex individuals would respond to a specific change, such as the acquisition and implementation of a more efficient device, is virtually impossible without knowledge of their situation and decision processes prior to the change. Frequently, the entering assumptions regarding how the population “should” respond are based on assumed altruism, rather than on any understanding of human nature.

    It is interesting to note here that consumer responses to surveys and focus groups regarding such issues tend to produce results consistent with the predilections of the surveyors about 3-4 times greater than is reflected in buying decisions, when the consumers’ money is on the line. I think this suggests that consumers are more rational than pollsters. :-)

  2. One thing I find missing in discussion of the rebound effects is the benefit consumers get from consuming more of the energy service when it gets more efficient, Consider Ed Reid’s HVAC example above. Even if little energy is saved, people are more comfortable, which is clearly a net benefit, and may lead to higher productivity and better health. Hence, even if 100% of the energy savings are consumed by rebound effects, a more efficient society will be much better off than an inefficient one.

    Rebound effects are simply not a good argument against energy efficiency: financial benefits may be lower than predicted, but only because consumers exchange them for goods which they clearly value more. Rebound effects are simply examples of efficient markets working well.

  3. You’re right, that is a frequently neglected point. The Breakthrough Institute report on rebounds does discuss it, and you see the point made elsewhere in such discussions, but really it should be made more prominently. It is a normal consequence of ordinary economic activity to become more efficient over time (though it isn’t the only economic force and not the only driver of innovation). As we become more efficient in using a resource, whether we as a whole end up using more or less overall, it is still the case that we’re better off with the technical advance and increased range of possibilities.

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