In the pages of United Nations Industrial Development Organization (UNIDO)'s Making It quarterly magazine, I and my colleague and Breakthrough Institute Senior Fellow Harry Saunders published an article explaining the impact and implications of the energy demand "rebound effect" spurred on by energy efficiency.
The article builds upon the Breakthrough Institute's "Energy Emergence: Rebound and Backfire as Emergent Phenomena," a comprehensive literature review pointing to the expert consensus and evidence that below-cost energy efficiency measures drive a rebound in energy consumption that can erode much of expected energy savings.
Read the full article: "Hot topic: Does energy efficiency lead to increased energy consumption?," Making It June, 2011
In the article, we argue:
Truly cost-effective energy efficiency measures lower the effective price of the services derived from fuel consumption - heating, cooling, transportation, industrial processes, etc. - leading consumers and industry alike to demand more of these services. There are other indirect and economy-wide effects as well, as consumers re-spend money saved through efficiency on other energy-consuming goods and services, industrial sectors adjust to changes in the relative prices of final and intermediate goods, and greater energy productivity causes the economy as a whole to grow. Collectively, these economic mechanisms drive a rebound in demand for energy services that can erode much - and in some cases all - of the expected reductions in total energy use, along with much-hoped-for reductions in greenhouse gas emissions.You can also find an introductory FAQ on the rebound effect here. Read more!
Furthermore, rebound effects are often most pronounced in the productive sectors of the economy, including industry and agriculture, as well as throughout the world's emerging economies.
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Conventional climate mitigation strategies count on energy efficiency to do a great deal of work. For example, the IEA in a global climate stabilization scenario published by the agency in December 2009, estimates that efficiency measures could account for roughly half of the emissions reductions needed. Yet, from a climate or global resource conservation perspective, rebound effects mean that for every two steps forward taken through greater efficiency, rebounds take us one (or more) steps backwards. This is particularly true throughout the developing world, and in the productive sectors of the global economy.
A clear understanding of rebound effects therefore demands a fundamental re-assessment of energy efficiency’s role in global climate mitigation efforts.
A continued failure to accurately and rigorously account for rebound effects risks an over-reliance on the ability of efficiency to deliver lasting reductions in energy use and greenhouse gas emissions. Without a greater emphasis on the other key climate mitigation lever at our disposal – the de-carbonization of global energy supplies through the deployment and improvement of low-carbon energy sources – the global community will fall dangerously short of climate mitigation goals.
At the same time, however, we can re-affirm the role of energy efficiency efforts in expanding human welfare and fueling global economic development. Unlocking the full potential of efficiency may very well mean the difference between a richer, more efficient world, and a poorer, less efficient world. The former is clearly the desirable case – even if the world uses more or less the same amount of energy in either scenario.
The pursuit of any and all cost-effective efficiency opportunities should thus continue as a key component of an efficient course for global development, even as we reconsider the degree to which these measures can contribute to climate mitigation efforts.
Matthew Wald is a Reporter for the Washington Bureau at The New York Times, covering environmental and energy issues, as well as transportation, aviation and highway safety. Having joined The Times in October 1976 as a news clerk in the newspaper’s Washington bureau, Wald held positions at the New York metropolitan desk, the State Capitol in Hartford, and as a national correspondent, covering a variety of areas including housing and nuclear power, before joining the Washington bureau in September 1996. Wald has covered the Fukushima crisis extensively in the New York Times.
Edward Kee is a VP at NERA Economic Consulting and a specialist in the electricity industry with experience in nuclear power, electricity markets, restructuring, regulation, private power, and related issues. For more than 20 years, he has provided testimony as an expert witness on a range of electricity industry issues in state and federal courts, before the Federal Energy Regulatory Commission, and before other legal and regulatory bodies in the US and around the world. Mr. Kee also provides strategic advice to companies and governments on issues related to the nuclear and electricity industries. Mr. Kee holds an MBA from Harvard University and a BS in Systems Engineering from the US Naval Academy.
Jesse Jenkins is Director of Energy and Climate Policy at the
Marc Gunther is a veteran journalist, speaker, writer and consultant whose focus is business and sustainability. Marc is a contributing editor at FORTUNE magazine, a senior writer at
