- The IPCC says “rebound effects cannot be ignored” in crafting climate mitigation efforts
- Rebound effects can erode roughly 20-60% of the energy savings from cost-saving energy efficiency measures in rich, developed countries, and rebounds are likely larger in emerging economies with a greater appetite for energy.
- Properly accounting for the size of rebound effects is critical to “a more-realistic calculation” of the contribution of energy efficiency to climate mitigation.
Cost-saving energy efficiency measures can trigger a rebound in energy demand which erodes some of the climate benefits of efficiency, according to the Intergovernmental Panel on Climate Change’s Fifth Assessment Report. These “rebound effects cannot be ignored,” the IPCC concludes after surveying the available peer-reviewed scientific literature in its Working Group Three report on Mitigation of Climate Change.
“By considering the size of the rebound effect, a more-realistic calculation of energy-efficiency measures can be achieved,” the IPCC writes, noting that proper attention to these rebound effects is critical to “providing a clearer understanding of [efficiency’s] contribution to climate policy.”
Focusing on rebound effects is important, because the magnitude of rebound determines how effective cost-saving efficiency improvements are at contributing to lasting reductions in total energy use and therefore greenhouse gas emissions.
Energy efficiency has frequently been cited as the single greatest contributor to emissions reduction and climate mitigation strategies by everyone from the International Energy Agency to consultants like the Rocky Mountain Institute and McKinsey and Company to efficiency advocates and environmental NGOs. Energy efficiency “makes the largest contribution to global emissions reduction” in the IEA’s latest roadmap to stabilize global warming, for example, while President Obama told reporters in 2009 that with efficiency, “we can save as much as 30 percent of our current energy usage.”
Yet none of these studies takes serious account of rebound effects,* which can undermine the ability of efficiency measures to deliver such significant energy use and CO2 reductions.
Rebound effects are triggered when energy efficiency improvements lower the cost of energy services, such as lighting, transportation, heating or cooling, or industrial processes.
“Direct rebounds appear when, for example, an energy-efficient car has lower-operating costs encouraging the owner to driver further,” the IPCC explains.
At the same time, “indirect rebounds … appear when increased real income is made avialable by saving energy costs that are then used to invest or purchase other goods and services that emit GHG emissions.”
At the economy-wide level, “market price effects, economic growth effects, and adjustments in capital stocks that result in further increases in long-run demand response for energy” are all examples of macroeconomic rebound effects.
According to the IPCC’s review of the academic literature, the magnitude of rebound effects varies from context to context, but they can be significant.
In developed economies, “the majority of studies” show rebound effects for end-use energy services like heating, cooling, and lighting, “in the region of 20-45% … meaning that efficiency measures achieve 65-80% of their original purposes.” For transportation, the IPCC notes that “there are some studies that support higher rebounds,” with one study finding rebounds in transportation eroded more than half of the original energy savings.
In general, then, rebound effects in rich, developed countries could erode 20-60% of the original energy savings.
There is also “evidence to support the claim that rebound effects can be higher in developing countries,” the IPCC reports.
As the IPCC explains, “rebound effects in the residential sector in India and other developing countires can be expected to be larger than in developed economies because high-quality energy use is still small in households in India and demand is very elastic.” Given that developing economies will account for the vast majority of global energy demand growth over the coming decades, the IPCC recommends further research “on the precise scale of rebound effects in developing countries.”
In some contexts, there is even “some evidence” that “rebound effects [can] exceed initial savings,” leading to a so-called “backfire.”
Clearly climate mitigation strategies that lean heavily on energy efficiency measures cannot ignore rebound effects any longer.
The IPCC notes that rebound effects “do not make energy-efficiency measures completely redundant.” Indeed, as I have written previously, “rebound effects, particularly in emerging economies, mean consumers and firms are using energy efficiency to enhance their economic welfare, getting more energy services out of the same or less overall energy use. That’s a fundamentally good thing.”
That said, accurately estimating how much rebound effects erode lasting energy savings is essential to depict the contribution of efficiency to long-term climate and energy strategies.
The focus on rebound effects in the latest IPCC report stands in contrast to the 2007 Fourth Assessment Report, which gave just two brief mentions to these important phenonoma.
The latest IPCC report reflects the increasingly robust academic literature on the subject of rebound effects, which has grown remarkably since a 2007 study published by the UK Energy Research Centre helped spark renewed interest in the subject. (Note: I was the lead author on a February 2011 review of the literature on rebound effects which helped spark further interest on the topic in the United States.)
- IPCC Working Group III report, Mitigation of Climate Change, Chapter 5: “Drivers, Trends and Mitigation (see page 54 on Rebound Effects), 2014
- Breakthrough Institute, “Energy Emergence: Rebound and Backfire as Emergent Phenomona,” a review of the literature, 2011
- Breakthough Institute FAQ on Rebound Effects, 2011
- UK Energy Research Centre, “An Assessment of the evidence for economy-wide energy savings from improved energy efficiency,” 2007
* After a brief discussion in an endnote, McKinsey, for instance, completely disregards rebound effects. In Reinventing Fire, RMI dismisses the possibility of significant economywide rebound. The IEA’s 2012 World Energy Outlook assumes that rebound effects erode only 9 percent of energy savings, in contrast to the much larger range of rebound effects supported by the academic literature (and summarized by the IPCC’s Working Group III). I do not have access to the full 2014 update to the IEA’s climate strategy, but the executive summary does not mention rebound effects at all, despite relying on efficiency for “the largest contribution to global emissions reductions.”